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How to Find Profitable Opportunities in Spin-Offs
A study done by a consulting firm The Edge and accounting firm Deloitte that studied spin-offs from 2000 through 2014 with the parent companies having a market cap of at least $250 million. In India, which is the market that Godum focuses on, spin-offs generated an average excess return over the market index of around 36%. Seth Klarman, Joel Greenblatt, and Peter Lynch have all expressed the huge opportunities available in spin-offs.
On today’s episode, Clay continues his review of Gautam Baid’s book, The Joys of Compounding. Today’s episode is part 3 of our review of this incredible book.
Gautam Baid is the Managing Partner and Fund Manager of Stellar Wealth Partners India Fund, a Delaware-based investment partnership which is available to accredited investors in the US. The fund is modeled after the Buffett Partnership fee structure and invests in listed Indian equities with a long-term, fundamental, and value-oriented approach.
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro
02:15 - How journaling can make us better investors.
07:00 - Why incentives are at the root of all human behavior.
09:22 - How management incentives impact our long-term returns as investors in businesses.
18:15 - Why being directionally right is more important than being precise in assessing the intrinsic value of a business.
25:37 - How maintenance capex impacts the value of a business.
32:14 - Ways in which value investors fall for value traps.
32:45 - Why we as investors should respect the market’s wisdom for pricing stocks.
35:09 - The three most important words of investing.
41:25 - How high-quality businesses enhance our margin of safety.
47:55 - How one commodity investment catapulted Gautam to nearly achieving financial independence.
53:36 - Why Seth Klarman, Peter Lynch, and Joel Greenblatt consider spinoffs to be ripe hunting grounds for investors.
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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