Stephane Manos

Stephane Manos

April 09, 2014 08:37 ET

Stephane Manos Points the Way to Event Driven Investments, Spin-Offs

MONTREAL, QUEBEC--(Marketwired - April 9, 2014) - Stephane Manos leads the Special-Situations Department at Valsef Capital, analyzing event driven investments, primarily spin-offs. A full-time investor, Manos has focused on distinct parts of the market that tend to outperform the market. For example, in January 2013, Starz was spun off from Liberty Media Corporation and began trading at $14.00. Starz closed the year at $30.00, generating a return of over 100% in less than 1 year. Many similar opportunities exist in the investment world of spin-offs.

In business, spin-offs occur when a parent company "spins off" a division into an independent business. The spun off company has assets, technology, intellectual property, employees, and existing products from the parent organization. Some of these spin-offs are diamonds in the rough that were being overlooked in massive organizations. One main reason that parent companies opt for spin-offs, versus a division sale, is that it allows them to discard the said division tax free, for themselves and their shareholders.

Historically, spin-offs outperform the Standard & Poor's 500 by 22% in the first year. Yet, market inefficiencies exist when it comes to spin-offs. Shareholders inherit the spun-off shares. The financial planner/advisor usually has little to no knowledge on how this "new" company is positioned to its peers. Following the insiders is very important when dealing with spin-offs as options are usually given days after the company spins off, aligning insiders with shareholders. New opportunities now exist for ex-division leaders turned into CEOs. They now run their own company, have their own capital allocation strategy, their own business strategy and their own team. Wall street analysts cannot model this and the lack of information makes this new investment very difficult. Analysts and investors can only speculate on how the company will perform resulting in no steady investor base.

Stephane Manos believes new spin-off opportunities are available. Analysts and investors have great difficulty making investment decisions based on limited information provided before the spin-off. At best, investors will make educated guesses based on very little information available, with analysts eventually covering the new spin-off, once earnings are reported. When Manos targets a spin-off, he makes a point to mark a company in which analysts will start discussing it. He believes it is vital to select a company that is not too small or niche, which will not attract analysts, and hence generate the necessary buzz.

When Starz first spun out at $14.00 it was initially looked upon as unattractive and was difficult to own. Starz is a premium cable channel, similar to HBO and Showtime, where subscribers pay a monthly fee to their cable operator and get access to a huge library of movies and some original series. By doing some research, it was clear to see that insiders were highly aligned to make the new STARZ succeed. With shares continuously over $30.00, Starz is in a great position for the special situations department, as it is still undervalued. They are growing their subscriber base, they have yet to produce a major hit like their rivals HBO (Games of Thrones) or Showtime (Dexter), have not entered into digital deals, are continuing to buy back their shares and, most importantly, have a great opportunity to deliver a great catalogue of video content, where there is great demand for it.

Starz is there to take advantage of this and is riding a big tailwind. Stephane Manos is here to take advantage of potential spin-offs yet to happen, helping investors move from a distressed market, into an opportunistic one.

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