Key Points:
Spinoffs beat the S&P 500 by about 10% a year for three years in the Cusatis-Miles-Woolridge study, with McKinsey later clocking 27% annualized versus 17% for the index.
If Comcast closes the NBCUniversal split by mid-2027 as guided, large-cap funds will be forced to sell at distribution.
Special Report: Your free guide is about to disappear (from Profits Run)
Comcast jumped 21% on Monday, while the Spinoff ETF (CSD) has returned 384% since 2009 versus 203% for the S&P 500.
I want you to picture something. It's next spring. You pour your coffee. You sit down. You open your brokerage account. And there are new shares sitting in there.
You didn't buy them. They just showed up.
Here's how that happens. Brian Roberts runs Comcast. On Monday he told the world he's breaking his own company in two. NBCUniversal, Peacock, the Universal theme parks. All of it. Spun off into a brand-new public company by the middle of 2027.
The stock jumped 21% on the news. Every headline today is about that pop. Every cable show is saying the deal "unlocks value." Nobody is telling you what comes next. So I will.
Earth’s Biggest Energy Source: Near Grand Canyon
Every energy headline this year pointed at the Middle East.
Oil prices. The Strait of Hormuz. Whether the deal would hold.
While everyone watched the sand over there, the real story was under the sand right here - near the Grand Canyon.
A crew reached a resource the International Energy Agency says could meet global electricity demand 140 times over.
They did it in 16 days.
The DOE had budgeted 64.
It can't be sanctioned, embargoed, or shut off by a foreign government.
It runs 24/7, with zero fuel costs.
Google signed a 15-year deal. Gates wrote a $100 million check.
On July 4th, the government hands it an advantage every other energy source just lost.
One company sits at the dead center of it.
If you own a single share of Comcast, you're getting those new NBCUniversal shares for free. They call it a tax-free distribution. That's the law on a deal like this. You wake up one morning. The shares are just there. No phone call. No paperwork. No choice.
And then most people will sell them. Right away.
The big mutual funds will be forced to sell. Their rules only let them hold large companies. The new NBCUniversal will be too small for that rule. So out it goes. Then the retail crowd sells too. They bought Comcast for the dividend. They didn't sign up for a theme park stock.
All that selling hits the new shares at the same time. The price drops. Hard. The whole thing looks like a dud on day one.
That's the moment everything turns.
Because the data on this is brutal. And it only goes one way.
Three professors at Penn State looked at every spinoff from 1965 to 1988. Cusatis, Miles, and Woolridge. They found the same answer in every decade. Spinoff shares beat the S&P 500 by about 10% a year. For three full years. McKinsey ran fresh numbers later. They got 27% a year for spinoffs. The S&P got 17%. Same period. Same market.
There's even a fund that owns nothing but spinoffs. The ticker is CSD. Since 2009, it has returned 384%. The S&P has returned 203%. Not close.
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I can't stop thinking about why this works so well. Part of it is the forced selling I just told you about. The shares get dumped at the start. So they're cheap. Part of it is the new boss. When you run a spinoff, your own stock is on the line now. No giant parent to hide behind. You show up to work like your house is on fire. And it usually shows up in the numbers.
Trivariate Research crunched fresh data this past spring. They found spinoffs beat their old parents by 12% in just the first 400 trading days. That's about a year and a half. The new guys win. Almost every time.
You know who learned this the hard way? Anyone who owned eBay back in 2015.
That year, eBay spun off PayPal. Same setup as Comcast today. Shares just showed up in your account. Most folks sold them. PayPal was a sleepy little payment company. eBay was the famous brand. Why keep the smaller piece?
I'll tell you why. PayPal is now worth more than eBay. A lot more. The people who sold their PayPal shares in 2015 left billions on the table. The people who held got rich. PayPal hit a market cap above $300 billion at its peak. eBay has never broken $90 billion. The split made one rich and left the other behind.
I don't think most people realize how often this story repeats. Kraft splits into Kraft and Mondelez. Mondelez wins. Abbott splits off AbbVie. AbbVie wins. Phillips 66 leaves ConocoPhillips. Phillips 66 wins. The smaller piece keeps winning.
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Now Comcast has put this same setup right in front of us.
I get it. Holding a brand-new stock feels weird. You didn't research it. You didn't pick it. It feels like junk mail in your account. The urge to clean it up is real. I felt that urge myself, years back, with a different spinoff. I sold too soon. Watched the new stock run for two years without me.
Don't clean it up.
The day those shares land is the day the forced sellers start dumping. Let them. Three years from now, the data says you're the one smiling. The patient guy who saw it coming. The one who knew what the smart money already knew.
Nobody knows the exact price NBCUniversal will trade at next year. Nobody knows what Peacock looks like in 2028. I sure don't. But I know what sixty years of spinoff data say. I know what eBay-PayPal proved right in front of us.
When a big company breaks itself in two, most folks sell the smaller piece. That's the one that wins.
More on this tomorrow.
— Lauren
Editor, American Ledger
