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Performance Characteristics of Spin-Offs


Historical Performance of Spin-Offs


RYAN CASEY: The research that we've done, which goes back to the mid-1990s, and the academic research that's out there, which goes back to approximately the 1960s, have all shown that a basket of spin-off securities, both in the U.S. and internationally, has outperformed the market over a multi-year time period/


What Phase of the Life Cycle is Most Important?


CASEY: I think many investors may be familiar with a spin-off's short-term investment prospects, which entail the forced selling and early opportunities in the spin-off's life cycle. What few people may be aware of is how long the fundamental improvement story lasts in the spin-off lifecycle. Once a company is independent and able to pursue its own strategies, there can be a significant amount of revenue growth. Companies are often allowed to right-size their headcount and expense structure in a very meaningful way, leading to very meaningful margin improvement in earnings growth. Often if a company is perceived as not as efficient as its peers or growing slower than them, it may initially start trading at a lower multiple. Once those improvements start to kick in, however, there may be a significant amount of multiple expansion as well.


International Diversification


SALVATOR TIANO: Historically, a large portion of the return from spin-offs has come from a limited number of transactions. It's similar to the eighty-twenty rule in that a small number of spin-offs may deliver the majority of the returns in the space. Therefore we're trying through international diversification to cast as wide a net as possible to make sure that we invest in the spin-offs that will deliver the greatest outperformance.


Impact of M&A on Spin-Offs


CASEY: Another part of the potential return in spin-offs historically has been the propensity for them to be acquired at a relatively high rate. Based on our research going back roughly 12 years, we have found that 10% of spun-off companies have been acquired in their first five years of life as an independent company at premiums of roughly 20%. It's also interesting to note that in the U.S. there are restrictions on M&A activity for a period of up to two years once the company is separated. For those reasons it's very important to have exposure to spin-offs in years three, four, and five.


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IMPORTANT DISCLOSURE


The views and opinions expressed are those of the speaker and are current as of the video's posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about Van Eck Funds, Market Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com.


Please note that Van Eck Securities Corporation offers investment products that invest in the asset class(es) included in this video. An investment in the Market Vectors Global Spin-Off ETF may be subject to risks which include, among others, risks associated with spun-off companies that may have limited liquidity, pricing inefficiencies, and may be more speculative in nature than established companies, all of which may adversely affect the Fund. Foreign investments, specifically those in Europe and Asia, are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's return. Small- and medium-capitalization companies may be subject to elevated risks. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.


Diversification neither assures profit nor protects against loss.


The Fund is not sponsored, endorsed, sold or promoted by Horizon Kinetics, LLC. Horizon Kinetics, LLC makes no representation or warranty, express or implied, to the owners of Market Vectors Global Spin-Off ETF or any member of the public regarding the advisability of investing in securities generally or in Market Vectors Global Spin-Off ETF.


Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. Please read the prospectus and summary prospectus carefully before investing.

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