Spun-off companies may be falling out of favor with U.S. stock investors if their recent performance is any guide.
Seven newly independent companies made market debuts yesterday. Only three -- Babcock & Wilcox Enterprises Inc., a power-generation specialist; Chemours Co., a chemical producer, and Edgewell Personal Care Co., a household-products maker -- closed higher. Three others dropped more than 6 percent.
As the attached chart illustrates, the outcome wasn’t an isolated event. The chart compares the Beacon Spin-Off Index, the basis for an exchange-traded fund managed by Guggenheim Investments, with the Russell 2000, whose companies’ market values are similar to those of many spinoffs.
The Beacon index, which consists of 40 stocks and limits each one to a 4.5 percent weighting, reached its high for this year on April 10. The indicator fell 6.4 percent from its peak through yesterday as the Russell 2000 lost just 0.7 percent.
Yesterday’s worst performance among the newly public companies was an 8.6 percent drop in Horizon Global Corp., an auto-parts maker that TriMas Corp. spun off. TopBuild Corp., a home-insulation company that used to be owned by Masco Corp., fell 6.9 percent. Cable One Inc., a former unit of Graham Holdings Co., slid 6.2 percent.
Baxalta Inc., a former pharmaceutical unit of Baxter International Inc., rounded out the losses. Baxalta’s shares dropped 1.4 percent.
Babcock & Wilcox Enterprises gained 6.7 percent after separating from BWX Technologies Inc., as the former Babcock & Wilcox Co. is now known. Chemours, previously a unit of DuPont Co., closed with a 3.2 percent gain after tumbling as much as 8.8 percent in early trading. Edgewell rose 3.6 percent after Energizer Holdings Inc. completed a spinoff.