Jim Cramer is always a fan of corporate break-ups as a method for unlocking value. And lately it seems like a lot of companies have joined him in the love of a break-up, as there were 38 spinoffs in 2015 with a parent company taking one of its sub-divisions public as a separate publicly traded company.
Earlier in the month, Goldman Sachs chief US equity strategist David Kostin did a deep dive into a number of the spinoffs. Kostin found that spinoffs tend to outperform both their former parent companies and the S&P 500, especially when the spinoffs traded at a cheaper price to earnings multiple than their former parent, or operate in a different industry.
Hewlett Packard Enterprises was officially separated from the old Hewlett-Packard, now HP Inc last October. After years of underperformance, Hewlett-Packard decided to break up the business to bring out the value. Unfortunately, the spinoff came at the end of last year, which was a pretty terrible time for the market.
"Do not overlook the fact that Meg Whitman [CEO] can do wonderful things here. This is the growth vehicle that was buried within the old Hewlett-Packard and I think it will shine on its own for many years to come," Cramer said.