The Misfits: TopBuild Corp. (BLD)
TopBuild is a shining example of an outperforming spinoff. What management team decided to let it go?
A spinoff being an excellent investment feels counterintuitive. One company decides that a segment or division isn’t worth keeping and sets it loose on the public market as a separate company. Surely, the management team of the original company didn’t think too highly of the business if they decided to let it go.
And yet, spinoffs can be some of your best investment opportunities. Peter Lynch professed his love for spinoffs in his books, and plenty of companies profiled here are the product of corporate spinoffs.
What I often wonder is why a company decides to spin these businesses off in the first place? Often, the spun-out business ends up being the better-performing stock.
One such example of this phenomenon is building supply distributor TopBuild (NYSE: BLD). In 2015, Masco (NYSE: MAS) decided to spin TopBuild out of the parent company. Since then, TopBuild has gone on to run circles around both Masco and the broader market.
If TopBuild was this rockstar stock hiding in the Masco portfolio, then why would they want to let it go?
Let’s dig into what has fueled TopBuild’s success, why Masco may have decided to make it a separate company, and whether Topbuild’s success over the past decade is repeatable.
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