Time Warner (NYSE: TWX) recently announced the upcoming spin-off of its cash generation machine otherwise known as Time Warner Cable.
Spin-offs have historically outperformed the market (see the nine studies cited by consulting firm Spin-Off Advisors) and ETF investors can take advantage of this tendency through Claymore’s Clear Spin-Off ETF (Amex: CSD).
CSD tracks an index of approximately 40 companies that have been spun-off within the past two years, but not more recently than six months prior to the applicable rebalancing date. There are no limits on market cap, however, the portfolio firms are primarily small- and mid-cap companies with capitalizations under $10 billion.
Time Warner Cable won’t make an appearance in the CSD index for awhile. The investing logic on spins is that they go down before they go up as portfolio managers perform housekeeping and adjust their holdings. However, the newly formed cable company could make for an interesting candidate for inclusion in the spin-off index and ETF.
For more information, see Claymore’s website.