In this article, we discuss the 5 recent spin-off companies that hedge funds are piling into. To read the detailed analysis of spin-off companies and their recent performance, go directly to the 11 Recent Spin-off Companies That Hedge Funds Are Piling Into.
5. PHINIA Inc. (NYSE:PHIN)
Number of Hedge Fund Holders: 27
In July 2023, BorgWarner Inc. (NYSE:BWA) spun off its fuel systems and aftermarket segments into an independent company, PHINIA Inc. (NYSE:PHIN).
On November 15, PHINIA Inc. (NYSE:PHIN) declared its quarterly dividend of $0.25, which is payable by December 15 to the shareholders of record on December 1. The stock’s dividend yield was 3.45% at the time of writing on December 15.
Ariel Investments mentioned PHINIA Inc. (NYSE:PHIN) in its third-quarter 2023 investor letter. Here is what it said:
“Finally, we established a position in manufacturer of premium fuel and electrical systems, PHINIA Inc. (NYSE:PHIN), which was a spinoff from BorgWarner Inc. (BWA). Phinia is focused on the design and development of performance and emissions components of combustion and hybrid vehicles. The remaining BWA business produces components with similar capabilities, however, BWA is focused on electric vehicles. Overall, the market is excited about the longer-term organic growth of BWA at lower margins versus the higher margin Phinia business given questions of how long demand for combustion/hybrid vehicles will continue.”
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4. Knife River Corporation (NYSE:KNF)
Number of Hedge Fund Holders: 29
In June 2023, Knife River Corporation (NYSE:KNF) became an independent company after MDU Resources Group, Inc. (NYSE:MDU) spun off its construction materials subsidiary. Knife River Corporation (NYSE:KNF) is headquartered in North Dakota, USA.
In the last three months, Knife River Corporation (NYSE:KNF) was covered by 2 Wall Street analysts, and both maintain a Buy rating on the stock. At the time of writing on December 15, the average price target of $75 had an upside of 15.26%.
On December 8, Oppenheimer analyst Ian Zaffino increased the price target on Knife River Corporation (NYSE:KNF)’s stock to $75 from $65 and kept an Outperform rating. Among the company’s several growth drivers, the analyst mentioned its mergers and acquisitions, carrying out its EBITDA margin expansion plan, state and local infrastructure spending, etc.
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3. Crane NXT, Co. (NYSE:CXT)
Number of Hedge Fund Holders: 37
Crane NXT, Co. (NYSE:CXT), previously Crane Holdings Co., was established after Crane Company (NYSE:CR) spun off its payment and merchandising technologies business in April 2023.
According to Insider Monkey’s database, 37 hedge funds held a stake in Crane NXT, Co. (NYSE:CXT)’s stock in the third quarter at a combined stake value of $513 million.
On November 6, Crane NXT, Co. (NYSE:CXT) announced its Q3 earnings result with a non-GAAP EPS of $1.09 and revenue of $352.9 million, which grew 5.3% year-over-year (YoY).
ClearBridge Investments mentioned Crane NXT, Co. (NYSE:CXT) in its second quarter 2023 investor letter. Here is what it said:
“We initiated a position in Crane, in the industrials sector, which then split into two separate companies, Crane and Crane NXT, Co. (NYSE:CXT), both of which we retained. Under the split, Crane will continue to be a diversified manufacturer of highly engineered industrial products for the Aerospace & Electronics, Process Flow Technologies, and Engineered Materials industries. Crane NXT designs and manufactures banknotes for over 50 central banks, including the Fed. It is also the market leader in currency, coin and credit card payment devices in self-service retail machines, vending machines and back-office cash processing equipment. We believe both Crane NXT and Crane Company were undervalued within the former consolidated Crane, based on their strong competitive advantages and incremental returns on capital.”
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Follow Crane Nxt Co. (NYSE:CXT)
2. Madison Square Garden Entertainment Corp. (NYSE:MSGE)
Number of Hedge Fund Holders: 41
Madison Square Garden Entertainment Corp. (NYSE:MSGE) is a live entertainment company that was spun off from Sphere Entertainment Co. (NYSE:SPHR) in April 2023.
Out of the 5 Wall Street analysts that covered Madison Square Garden Entertainment Corp. (NYSE:MSGE) over the last three months, 3 maintained a Buy rating on the stock. The average price target of $38.75 represented an upside of 21.74% at the time of writing on December 15.
The hedge fund sentiment was positive toward Madison Square Garden Entertainment Corp. (NYSE:MSGE) in the third quarter, according to Insider Monkey’s database. In Q3, 41 funds had investments in the stock, up from 36 in the previous quarter.
Madison Square Garden Entertainment Corp. (NYSE:MSGE) was mentioned in Ariel Investments’ second-quarter 2023 investor letter. Here is what it said:
“Additionally, live entertainment business, Madison Square Garden Entertainment Corp. (NYSE:MSGE) completed its spin-off from Sphere Entertainment Co. (SPHR) in the quarter. The company’s portfolio includes a collection of venues, such as New York’s Madison Square Garden, Radio City Music Hall, Beacon Theatre and The Chicago Theater. MSGE also features the original production of the Christmas Spectacular starring the Radio City Rockettes. In our view, MSGE’s assets are stable cash flow generators and should enable deleveraging. At current valuation levels, the company is trading at an attractive 40% discount to our estimate of private market value.”
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1. Kenvue Inc. (NYSE:KVUE)
Number of Hedge Fund Holders: 84
Kenvue Inc. (NYSE:KVUE) was founded as an independent company after Johnson & Johnson (NYSE:JNJ) spun off its consumer health unit in August 2023.
On December 13, Citi raised the price target on Kenvue Inc. (NYSE:KVUE)’s stock to $23 from $21 and maintained a Neutral rating.
According to Insider Monkey’s database, the hedge fund sentiment was quite positive toward Kenvue Inc. (NYSE:KVUE). In the third quarter, 84 hedge funds were bullish on the stock with a total stake value of $3.37 billion, compared to 31 funds with a combined stake value of $734.446 million in the previous quarter.
Mayar Capital commented on Kenvue Inc. (NYSE:KVUE) in its third quarter 2023 investor letter. Here is what it said:
“We also initiated a new investment in the shares of Kenvue Inc. (NYSE:KVUE). In August, Johnson & Johnson completed the split-off from Kenvue in which J&J shareholders could tender their shares in exchange for Kenvue shares at a 7% discount. Kenvue is formerly the J&J Consumer Health business. The transaction makes sense – the Consumer division was always small for J&J and this separation gives investors two distinct options, one pure-play FMCG company, and one pure-play healthcare company. We like Kenvue’s strong brand portfolio across its OTC medication business as well as its beauty and other healthcare brands (such as Listerine and Johnson’s), and the company has some very strong positions in its niches. While this isn’t a fast-grower, the manufacturing scale, IP and distribution network of this business provide a deep enough moat to give reasonable assurances about the company’s quality. And the current valuation looks attractive.”
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You can also look at the 13 Cheap Penny Stocks to Buy According to Hedge Funds and the 12 Best Gold Stocks With Dividends.
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