High Growth Likely For These Real Estate Stocks: Altisource Portfolio Solutions S.A. (ASPS)

Page 1 of 2

On December 21, 2012, Luxembourg-based property management company Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) completed the spin-off of two of its former subsidiaries: Altisource Residential Corporation Class B (NYSE:RESI) and Altisource Asset (PINK:AAMC). The deal unlocks a tremendous amount of value in ASPS’s former subsidiaries and has already provided solid returns for investors who have continued to hold AAMC stock. In the coming months, this complex yet low-key spin-off may yet produce even greater returns for savvy investors.
The terms of this deal were rather complex. According to the agreement, all Altisource Portfolio Solutions shareholders of record on December 17, 2012 received one share of Altisource Residential for every three shares of Altisource Portfolio that they owned. In addition, Altisource Portfolio shareholders of record were to receive one share of Altisource Asset Management for every 10 shares of ASPS that they owned. The Altisource Asset Management shares were not assigned to a particular stock exchange and currently trade on the over-the-counter markets.

Spin-Off Performance
Since the finalization of the deal, the two spun-off stocks have behaved very differently. Altisource Residential Class B shares began trading at $18 per share on December 21 and have since fallen slightly. As of the close of trading on January 16, Altisource Residential shares were worth $16.63. This represents a one-month negative return of approximately 7.6 percent.

By contrast, Altisource Asset Management has outperformed the broader market. Since beginning life as a publicly-traded entity at $80 per share on December 21, the company’s stock has risen by nearly 31 percent in the span of a month. As of the close of trading on January 16, AAMC stock was worth $104.70 per share. During the month of January, the stock has traded as high as $120 per share. Investors who sold the stock at this short-term high realized a gain of 50 percent in just over three weeks.

Unfortunately, the premiums from the three-way spin-off may be reduced by the transaction’s classification as a taxable distribution. Altisource Portfolio Solutions shareholders of record on December 17 will be required to pay taxes on the new shares that they receive. These levies will be assessed in relation to the initial trading prices of the two new equities.

Fortunately, there may be considerable upside to AAMC’s current stock price. If the promise of further gains in the coming months and years was not enough to encourage AAMC shareholders to maintain their positions, this penalty might make them think twice about dumping their shares anytime soon. Altisource Residential is a different story. Although it has the potential to begin returning capital to shareholders through a revenue-sharing partnership with private title insurance issuer NewSource, no announcement to this effect has yet been made. Industry observers are estimating that any eventual Altisource Residential dividend could amount to 7 percent or more. If this does not come to pass within the next two or three quarters, investors might be wise to ease up on their RESI holdings and increase their stakes in AAMC.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!