European Spin-offs – Reality check part 3 (and final)

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Due to overwhelming demand (ok ok, it was only wexboy asking for it), I decided to add part 3 to my series about spin-off companies (part 1, part 2) in order to focus on a longer term view.

This time I selected 143 spin offs beginning on 01.01.2001 which were completed before December 2008 in order to analyse 1, 2 and 3 year performance numbers with the goal to validate the claim that year 1 and or year 2 are always difficult for spin offs and year 3 is kind of “take off”. Again, I compared the performance to the Stoxx 600 price index.

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Hornbach Q3 update

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Just right before Christmas, Hornbach Baumarkt issued its Q3 report.

Hornbach again showed an outstanding quarter:

As well as substantially boosting its sales, Germany’s fourth-largest DIY group also achieved disproportionate earnings growth in the first nine months of the 2011/2012 financial year (March 1 to November 30, 2011). While the Hornbach Group increased its ninemonth sales by 6.6 percent to Euro 2,581.9 million, operating earnings (EBIT) for the same period grew by 12.8 percent to Euro 191.2 million. The DIY megastores with garden centers in Germany were once again the key growth driver. With cumulative like-for-like sales growth of 6.0 percent, these continued to outperform their sector by a clear margin.

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It’s bazooka time: 489 bn EUR draw dawn on 3 year ECB facility, second bazooka still in store

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8 days ago, I commented on the ECB announcement which in my opinion was totally misinterpreted by the market:

My summary was as follows:

Summary: In my opinion, the market severely under estimates the potential impact of the announced measures. For many banks this will be the lifeline to survive the next few years and potentially even Governements could gain a „back door access“ to the ECB. I am not saying that banks are a „buy“ right now, but this should take a lot of stress outof the EUR banking system.
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Book Review: Joel Greenblatt -You can be a stock market genius

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This is one of the books I always wanted to read but never managed to:

When Joel Greenblatt published this book in 1997,he had a tremendous run as manager of Gotham capital.

The book is aimed towards the “average” investor and makes the case for investing in special situations.

The best special situation he recommends are spinoffs, when a usually large company is spinning off a part of its business in the form of stocks which are simply distributed to the owner of the large company. As the owner of the large company don’t really want this stock, this creates an investing opportunity, especially if the management of the spin off is incentivised correctly.

He touches a couple of other special situations (merger securities, recaps, reorganisations, companies emerging from bankruptcy), which should be well known to people having read “Margin of safety” or other value oriented books.

The case studies in the book are good, it is interesting to see that Greenblatt invests even in highly indebted companies if they are “special”.

For a European investor in our time howver, the book contains only partly directly actionable advise, as spinoffs are avery rare breed today. However it is still a very good books which shows that “special situation” investing can lead to great investment results.

Summary: I think the book is a good start for anyone who wants to have an “easy to read” entry into the world of special situation investing, although the focus of the book might not be easily applicable in current times.

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