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Investors looking for some outperformance may want to check out stocks that are spun off from their parent companies, according to Morgan Stanley. Two years after completion, spinoffs outperformed the market by an average of 10.2%, the investment bank found. Parent companies, on the other hand, underperformed by 8%. Returns were benchmarked to the S & P 500 . “Spinoffs present investors with a unique opportunity to capitalize on unlocked and potentially underappreciated value,” analyst Todd Castagno wrote in a note Monday. The most successful spinoffs in the past 20 years, on average, have been in the consumer staples and materials sectors, he explained in an April note. Mid-sized deals averaged the highest excess returns, he said. Breaking up has been a growing trend , with 2023 expected to see another busy year for corporate spin offs. Here are some of the companies that have struck out on their own in the past year. The newer spin-offs have a negative relative return so far, but those that broke off earlier in the year or late last year are positive. The most recent spinoff was Phinia, from automotive supplier BorgWarner . The new company, which began trading on the New York Stock Exchange on July 5, focuses on fuel systems and aftermarket supplies for cars and trucks. Fortrea , spun off from LabCorp , began trading on the Nasdaq on July 3. The contract research organization provides access to clinical trial management and technology solutions to pharmaceutical and biotechnology companies. One of the biggest spinoffs in the past year was GE Healthcare Technologies , which split from General Electric in December. The medical technology company, which is set to release second-quarter earnings next week, topped analysts expectations for both adjusted earnings per share and revenue when it reported first-quarter earnings in April at the same time as management gave a muted full-year outlook. Nevertheless, GE Health shares are up 39% year to date. — Michael Bloom contributed reporting.
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