Thanks for the wonderful post. I ask this question as a *general* question, as I don't want you to feel the pressure to prescribe specific buy/sell advice on a company like Worthington: when you find an interesting spinoff at an attractive valuation, how do you think about when to buy? For example, in this case -- you're more attracted to the RemainCo than LegacyCo, so do you wait until the spinoff to concentrate your investment into RemainCo, or do you start a position now considering that more folks may fine Worthington and eliminate the discount?
In Greenblatt's book, it seems he often would wait for the split as splits can generate a depression in price for a variety of reasons, but of course there's no one hard rule and these things should be taken on a case by case basis. I'd just be curious how you think about that question!
Good question. Typically, there's a post-spin off depression in the NewCo stock because the investors who wanted the RemainCo sell off their NewCo shares once they hit the market. That might happen with Worthington Steel when it's spun off. On the other hand, the RemainCo valuation may go up once the spin is completed, which would offset lost value in the NewCo, which you could then sell and reinvest elsewhere, including but not limited to, back into the RemainCo. That's one option to consider.
Thanks for the wonderful post. I ask this question as a *general* question, as I don't want you to feel the pressure to prescribe specific buy/sell advice on a company like Worthington: when you find an interesting spinoff at an attractive valuation, how do you think about when to buy? For example, in this case -- you're more attracted to the RemainCo than LegacyCo, so do you wait until the spinoff to concentrate your investment into RemainCo, or do you start a position now considering that more folks may fine Worthington and eliminate the discount?
In Greenblatt's book, it seems he often would wait for the split as splits can generate a depression in price for a variety of reasons, but of course there's no one hard rule and these things should be taken on a case by case basis. I'd just be curious how you think about that question!
Good question. Typically, there's a post-spin off depression in the NewCo stock because the investors who wanted the RemainCo sell off their NewCo shares once they hit the market. That might happen with Worthington Steel when it's spun off. On the other hand, the RemainCo valuation may go up once the spin is completed, which would offset lost value in the NewCo, which you could then sell and reinvest elsewhere, including but not limited to, back into the RemainCo. That's one option to consider.
Your reply is appreciated! Thanks, Todd.