Founder at Stock Spin-off Investing, Stock Spin-Off Investing

Richard Howe

Founder at Stock Spin-off Investing

Stock Spin-Off Investing

Generate attractive returns by taking advantage of inefficiencies in the stock spin-off market.

Stock Spin-offs

Event-Driven

<ul><li>The range of ideas is broad. The smallest market cap is a $15MM Canadian micro-cap that is trading below its net cash, and the largest is an $25BN market cap online travel company that is gobbling up its own shares.</li><li>We have ideas profiled from Poland, Canada, India, Austria, Argentina, Italy, and of course, the United States.</li><li>The report will start with my personal favorite idea and then cover the additional ideas in alphabetical order.</li></ul>

The range of ideas is broad. The smallest market cap is a $15MM Canadian micro-cap that is trading below its net cash, and the largest is an $25BN market cap online travel company that is gobbling up its own shares.We have ideas profiled from Poland, Canada, India, Austria, Argentina, Italy, and of course, the United States.The report will start with my personal favorite idea and then cover the additional ideas in alphabetical order.

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.</li>
<li>From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.</li>
<li>Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.</li>
</ul>


On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.
From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.
Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.


TOPIX FFW Transition - Big Flows from April to June

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

<ul>
<li>
Our Q3-2021 All Cap High-Risk screen of stocks produced a market-cap-weighted average price return of 2% and a simple average decline of 0.2%.</li>
<li>
Out of the 34 stocks that appeared in our Q3-2021 screen, 15 stocks saw an average share price decline of 11.5%, whilst 19 stocks appreciated on average by 14%. The two biggest declining stock  were down 25% and 19% respectively.</li>
<li>Our Q4 2021 screen, with 38 names (up from 34 seen in Q3 and Q2 2021) delivers an interesting composition this quarter, </li>
<li>
As in the previous few quarters, we anticipate the possibility of a risk of deteriorating credit metrics during the next few quarters: Q4 2021’s Altman Z score rests at 1.23, which is just up on Q3 2021’s level of 1.19.</li>
</ul>



Our Q3-2021 All Cap High-Risk screen of stocks produced a market-cap-weighted average price return of 2% and a simple average decline of 0.2%.

Out of the 34 stocks that appeared in our Q3-2021 screen, 15 stocks saw an average share price decline of 11.5%, whilst 19 stocks appreciated on average by 14%. The two biggest declining stock  were down 25% and 19% respectively.
Our Q4 2021 screen, with 38 names (up from 34 seen in Q3 and Q2 2021) delivers an interesting composition this quarter, 

As in the previous few quarters, we anticipate the possibility of a risk of deteriorating credit metrics during the next few quarters: Q4 2021’s Altman Z score rests at 1.23, which is just up on Q3 2021’s level of 1.19.


Screening the Silk Road: Q4 2021 High-Risk Names to Avoid

<h2>Eight new names, SoftBank remains for the 3rd quarter running</h2>
<ul>
<li>
OurQ2-2021 All Cap High-Risk screen of stocks produced a market cap-weighted average price decline of 2%. In comparison, the MSCI Asia Pacific Index posted a decline of 1.7% over the same period. The stock quality of our Q2 2021 decreased 2.4 points or 3.8% over the period. Within the mix of 34 stocks in our Q2 2021 (May) list 19 posted negative performance, with an average decline of 14.1%.</li>
<li>
At a static number of 34 stocks our Q3 2021 screen, delivers an interesting composition this quarter, with eight (8) new names and strong representation from Hong Kong in terms of geography and Industrials and Basic Materials from a sector perspective. This suggests that the “reopening of the economy” trade may have run its course for now.</li>
<li>Our Q3 2021 screen shows a further reduction in average stock rank (a reading on relative quality amongst the broad market peers with 100 being the highest) to 61 from 65.18 in Q2 2021.</li>
<li>
Stock specific focus: We discuss why SoftBank stands out as a stock that presents with additional risk. We also discuss the fact that whilst there is a high representation of Industrials in the list, within this list, there are several names that may warrant not being too bearish towards.</li>
</ul>

Eight new names, SoftBank remains for the 3rd quarter running


OurQ2-2021 All Cap High-Risk screen of stocks produced a market cap-weighted average price decline of 2%. In comparison, the MSCI Asia Pacific Index posted a decline of 1.7% over the same period. The stock quality of our Q2 2021 decreased 2.4 points or 3.8% over the period. Within the mix of 34 stocks in our Q2 2021 (May) list 19 posted negative performance, with an average decline of 14.1%.

At a static number of 34 stocks our Q3 2021 screen, delivers an interesting composition this quarter, with eight (8) new names and strong representation from Hong Kong in terms of geography and Industrials and Basic Materials from a sector perspective. This suggests that the “reopening of the economy” trade may have run its course for now.
Our Q3 2021 screen shows a further reduction in average stock rank (a reading on relative quality amongst the broad market peers with 100 being the highest) to 61 from 65.18 in Q2 2021.

Stock specific focus: We discuss why SoftBank stands out as a stock that presents with additional risk. We also discuss the fact that whilst there is a high representation of Industrials in the list, within this list, there are several names that may warrant not being too bearish towards.


Screening the Silk Road: Q3 2021 High-Risk Names to Avoid

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

In this insight, we take a look at the monthly performance of the trading opportunities surrounding TOPIX Index Rebalance events. During the month, we witnessed the Inclusion Events of cloud-based business accounting software company <a href="https://www.smartkarma.com/entities/money-forward-inc" target="_blank" data-smartkarma-citation="entities:25919:1" rel="noopener">Money Forward (3994 JP)</a>, water treatment technology company <a href="https://www.smartkarma.com/entities/nomura-micro-science-co-ltd" target="_blank" data-smartkarma-citation="entities:11317:1" rel="noopener">Nomura Micro Science (6254 JP)</a>, and printed circuit board manufacturer <a href="https://www.smartkarma.com/entities/meiko-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:20004:1" rel="noopener">Meiko Electronics (6787 JP)</a>. Furthermore, as discussed by <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> in <a href="https://www.smartkarma.com/insights/july-topix-ffw-rebalancing-trade" target="_blank" data-smartkarma-citation="insights:54275" rel="noopener">July TOPIX FFW Rebalancing Trade</a>, there were quarterly float adjustments for some constituents of the TOPIX Index which opened up a few trading opportunities. Below is a closer look at each of these situations.

In this insight, we take a look at the monthly performance of the trading opportunities surrounding TOPIX Index Rebalance events. During the month, we witnessed the Inclusion Events of cloud-based business accounting software company Money Forward (3994 JP), water treatment technology company Nomura Micro Science (6254 JP), and printed circuit board manufacturer Meiko Electronics (6787 JP). Furthermore, as discussed by Travis Lundy in July TOPIX FFW Rebalancing Trade, there were quarterly float adjustments for some constituents of the TOPIX Index which opened up a few trading opportunities. Below is a closer look at each of these situations. 

Japan

Meiko Electronics Co., Ltd. designs, manufactures, and markets printed circuit boards.  The Company also produces populated boards, board testing devices, and multi-video processors.

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Meiko Electronics (6787 JP)

Best Ideas of 2025

The range of ideas is broad. The smallest market cap is a $15MM Canadian micro-cap that is trading below its net cash, and the largest is an $25BN...

Richard Howe

TOPIX FFW Transition - Big Flows from April to June

Changes to the Topix FFW methodology will result in a turnover of 2.87% & trade of ¥2,285bn from April to June. There is a lot to trade on some...

Brian Freitas

Screening the Silk Road: Q4 2021 High-Risk Names to Avoid

As we move through into Q1 2022, we expect to see volatility around highly priced & leveraged names. This screen is a key starting point towards...

David Lepper

Screening the Silk Road: Q3 2021 High-Risk Names to Avoid

Screening the Silk Road Q3 2021: Asia Pac High-risk names to avoid screening is out now. Eight new names, despite being down 23%, SoftBank remains...

David Lepper

TOPIX Inclusion Trade Summary: July 2021

In this insight, we discuss the performance of trading opportunities surrounding TOPIX Index Rebalance events. In July, Money Forward, Nomura...

Janaghan Jeyakumar, CFA

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