In this article, we will take a look at 10 Recent Spin-off Companies That Hedge Funds Are Piling Into.
Spin-offs enable businesses to reduce operational burdens and focus on their most strategic options. However, the justification for a spinoff is far more complex, ranging from financial or legal constraints to conflicting strategic interests. Historically, spin-offs provided significant chances for outperformance. While the average spin-off yields moderate excess returns, studies repeatedly demonstrate that the best-managed spin-offs beat the overall market.
While spin-offs may underperform their “parent” firms for the first five days after the split, they outperform them by an average of 12% during the first 400 trading days. According to a long-term analysis conducted by The Edge Group, spin-offs have typically outperformed market returns by more than 10% annually for the past 25 years.
General Electric is a solid representation of how spin-offs can reveal untapped value. GE stated in 2021 that it would split into three independent companies, aiming to offer clearer strategic focus, better operational oversight, and greater transparency for investors. Prior to the split, GE shares were hovering around $67, translating to a market cap of roughly $290 billion. After the separation, the three resulting companies were collectively valued at $474 billion. This breakup effectively added $184 billion in value, a boost of about 64%.
Our Methodology
For this list, we scoured Insider Monkey’s database and selected the top ten firms spun out in the previous five years that were popular among hedge fund investors. These stocks are also popular among analysts.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
10. Amrize Ltd (NYSE:AMRZ)
Amrize Ltd (NYSE:AMRZ) ranks among the recent spin-off companies that hedge funds are piling into. On March 16, Truist Securities reaffirmed its Buy rating on Amrize Ltd (NYSE:AMRZ) with a $75 price target. The firm stated that Amrize has gained prominence since its spinoff, especially for its cement revenues and margins.
Truist believes Amrize Ltd (NYSE:AMRZ) is one of the few names that do not require a residential cycle to expand, citing price increases in aggregates as well as cost-cutting efforts. The firm also noted increased industry concerns about a potential cement tariff, which might favor local players like Amrize Ltd (NYSE:AMRZ) with volume and pricing increases over the summer.
In a separate vein, Amrize Ltd (NYSE:AMRZ) confirmed the conclusion of its acquisition of PB Materials Holdings, Inc., which expands its operations in West Texas with 26 new locations. This acquisition increases Amrize’s foothold in a region with a growing infrastructure and energy project pipeline.
Amrize Ltd (NYSE:AMRZ) provides building solutions for infrastructure, commercial, and residential construction markets in North America through its Building Materials and Building Envelope segments.
9. Amentum Holdings Inc. (NYSE:AMTM)
Amentum Holdings Inc. (NYSE:AMTM) ranks among the recent spin-off companies that hedge funds are piling into. On March 12, Truist Securities reiterated its Buy rating for Amentum Holdings Inc. (NYSE:AMTM), with a $42 price target. The firm underlined the company’s long-term growth direction, which is supported by its main revenue streams.
Amentum’s $4 billion growth portfolio, separated into three segments: new nuclear, critical digital infrastructure, and space systems and technologies, accounts for roughly 30% of the company’s revenue.
Truist stated that the company looks to be well protected from possible artificial intelligence risks due to its lack of IT services and emphasis on mission-critical tasks. The firm suggested that investors should largely ignore potential near-term dangers such as the private equity backlog and the Iran war.
In addition, S&P Global Ratings raised Amentum Holdings Inc. (NYSE:AMTM) to ‘BB’ from ‘BB-‘ due to solid operating performance and significant debt repayments, with the forecast remaining steady. Amentum Holdings Inc. (NYSE:AMTM) proactively repaid $750 million of term loan debt in fiscal 2025, thereby accelerating its deleveraging efforts.
Amentum Holdings Inc. (NYSE:AMTM) provides mission-critical, technology-driven services to government and commercial markets.
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