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[estimize]

This Week's Top 10 Long/Short Estimize Signal Scores

According to our quantitative models, these stocks currently have the highest and lowest Estimize Signal scores.

The highly predictive Estimize Signal is a score which captures the likelihood of positive and negative drift around earnings. The higher the score, the stronger the possibility of positive drift; the lower the score, the stronger the possibility of negative drift. The score is calculated by consolidating several predictive factors within Estimize’s proprietary data set of crowdsourced earnings estimates collected from buy side, independent, and amateur analysts.

Top 10: Positive Scores

These are the top 10 stocks with the strongest positive signal scores today, suggesting they have the highest likelihood of a positive pre or post earnings drift. The Signal is best utilized in a dollar neutral portfolio consisting of the top and bottom decile of scores. Use it in your portfolio by rebalancing daily at the open using the new score delivered daily at 8am. Contact us to get set up for this »

IMPORTANT: Do not use the Signal as a buy/sell signal for individual stocks over the course of X (e.g. 2, 5, 10, 14) days.

Rank Company Earnings Report Date Signal Score (-100 to 100) Period 1 ENR Energizer Holdings Wed, Feb 1 100 Pre 2 FNHC Federated National Holding Company Wed, Feb 1 94 Pre 3 AI Arlington Asset Investment Corp. Tue, Jan 31 94 Pre 4 VNTV Vantiv Wed, Feb 1 87 Pre 5 CLFD Clearfield Wed, Feb 1 84 Pre 6 SAIA Saia Fri, Feb 3 83 Pre 7 WAIR Wesco Aircraft Holdings Thu, Feb 2 83 Pre 8 RXN Rexnord Wed, Feb 1 83 Pre 9 TMST Timkensteel Thu, Feb 16 83 Pre 10 PRK Park National Fri, Jan 27 81 Pre

Bottom 10: Negative Scores

These are the bottom 10 stocks with the strongest negative signal scores today, suggesting they have the highest likelihood of a negative pre or post earnings drift. The Signal is best utilized in a dollar neutral portfolio consisting of the top and bottom decile of scores. Use it in your portfolio by rebalancing daily at the open using the new score delivered daily at 8am. Contact us to get set up for this »

IMPORTANT: Do not use the Signal as a buy/sell signal for individual stocks over the course of X (e.g. 2, 5, 10, 14) days.

Rank Company Earnings Report Date Signal Score (-100 to 100) Period 1 INVA Innoviva Wed, Feb 1 -100 Pre 2 USG USG Corp Wed, Feb 1 -95 Pre 3 MTH Meritage Homes Wed, Feb 1 -90 Pre 4 HAYN Haynes International Thu, Feb 2 -89 Pre 5 MDC M.D.C. Wed, Feb 1 -80 Pre 6 VMC Vulcan Materials Thu, Feb 2 -80 Pre 7 PCTY Paylocity Thu, Feb 2 -65 Pre 8 KCG KCG Thu, Jan 19 -64 Post 9 MMP Magellan Midstream Partners Thu, Feb 2 -58 Pre 10 SANM Sanmina Fri, Jan 27 -57 Pre

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[valuewalkposts]

Spinoffs:  Finding Value

By Rupert Hargreaves

Warren Buffett, Benjamin Graham, Seth Klarman and Walter Schloss are probably some of the greatest value investors of all time, and at one point or another, these investment titans have all mentioned spinoffs as a critical area for value investors to seek out bargains. It is also one of the main topics of Joel Greenblatt’s masterpiece, You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits . And there’s plenty of cold hard data to back up this conclusion.

Indeed, only last week Goldman Sachs issued a Portfolio Strategy Research note to clients on this very topic using data from the past six months.

Spinoffs are highly likely to outperform parents

Goldman‘s research note, titled Investment Strategies For Spinoffs And Carve-Outs looked at the performance of spincos relative to their parent companies and the S&P 500 in the first two years after spinoff.

The bank’s research showed that since 1999, spincos have outperformed their parents and the index by a median of 9% and 6% respectively in the first two years after the spinoff.

During 2015, the value of spinoffs at completion jumped 81% to $176 billion, the highest level in 15 years. Goldman expects this trend to continue throughout 2016. The prospect of modest top-line growth coupled with flat margins this year is likely to push managements to pursue spinoffs as a means of generating shareholder returns.

If the above forecast does play out, and a new wave of spinoffs hits the market this year, value investors will be spoilt for choice when it comes to picking undervalued, and unloved spinoffs that have been unfairly sold by the market.

Will Xerox Corp (XRX) Spinoff Unlock Value for Investors?

Unpopular spinoffs were plentiful last year. 18 of the 28 spinoffs that have taken place since June 15 had, at least, one of three alpha-generating attributes:

Spinoffs Investment Strategies - Lower P/E multiple

Spincos that traded at a lower forward P/E multiple than their parents outperformed their parents by 18 pp and 26 pp respectively during the one-year and two-year period after the spinoff. Goldman found the hit rate of this outperformance was 63% and 75% respectively.

Lower expected EPS growth

Spincos with lower twelve-month EPS growth expectations compared to the parents generated median excess returns of 21pp and 6pp respectively during the one-year and two-year period after the spinoff. The hit rate here was 81% and 56% respectively.

Operated within a distinct industry versus their parents

If the spinco and parent operate in different industries, the relative median return of spinco versus the parent was +3 pp for both one and two-year periods. If the two companies operated within the same industry, the performance was -7pp and +20pp.

Fiat Stock Plunges After Spinoff Of Ferrari

Spincos with a lower P/E multiple, lower expected EPS growth and operating in a different industry to the parent generated a median relative return of +29 pp and +47 pp versus their parents during the one-year and two-year post-spinoff periods, with hit rates of 80% and 90%, respectively.

See a list of some srecent pinoffs below

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[Top Photo Credit:  Nerdfinds (Sam & Izzie), Flickr]