Joel Greenblatt, is a highly specialized, opportunistic investor. He thrives in “special situations” (spinoffs, restructurings, bankruptcies, mergers), blending deep fundamental analysis with contrarian patience. His style maps across dimensions as opportunistic, research-intensive, event-driven, and risk-aware, rather than broad market or momentum-driven.
Source of Edge : Information inefficiency: Finds value in overlooked, complex corporate events
Research depth: Gains edge by reading filings others ignore.
Time Horizon : long enough for special situations to resolve.
Risk Orientation : Asymmetric bets: Looks for limited downside with large upside., focuses on event-specific catalysts.
Breadth vs. Focus : Concentrated: Prefers a handful of high-conviction special situations.
a) Using long-dated options to capture value in special situations with limited downside.
7) Stub Stocks
a) Residual equity left after partial spin-offs or recapitalizations.
b) Often overlooked and mispriced
Question 3 & 4:
The Lemon Tree–Fleur Hotels restructuring is a textbook Greenblatt-style case: an asset-light vs. asset-heavy split with private equity involvement, creating two distinct vehicles that investors can analyze separately. Below is a structured list of recent candidates across Joel Greenblatt’s categories.
Lemon Tree Hotels (asset-light) → management, brand, loyalty, distribution.
• Fleur Hotels (asset-heavy) → property ownership and development.
• Catalyst: Warburg Pincus acquired APG’s 41% stake in Fleur and committed ₹960 crore in new equity.
• Why it fits Greenblatt’s playbook: Clear separation of business models, private equity capital infusion, and potential listing of Fleur within 12–15 months. This creates a “special situation” where investors can value each platform differently
Question 5:
1) "For [COMPANY] spinoff, apply Joel Greenblatt’s framework from You Can Be a Stock Market Genius and create a comprehensive report. Use SEC filings (10-K, 10-Q, Form 10, Schedule 14A), analyst commentary, and industry comparables. The report should include the following sections:"
2) Business & Operating Results (10-Ks / 10-Qs)
a) Extract segment-level operating results tied to the spinoff.
b) Highlight revenue, margins, growth trends, and capital intensity.
c) Provide a one-sentence definition of the spinoff’s business model.
3) Form 10 Analysis
a) Summarize the spinoff’s structure, debt allocation, and unusual disclosures.
b) Explain why the spinoff is happening—read between the lines (e.g., regulatory pressure, unlocking hidden value, shedding low-growth assets).
c) Clarify complicated items (tax treatment, contingent liabilities, separation agreements).
4) Management Incentives (Schedule 14A)
a) Detail executive stock ownership, options, restricted stock units, and compensation.
b) Identify who is “all in” on the spinoff and who is not participating.
c) Discuss alignment (or misalignment) between management incentives and shareholder value creation.
Special situations included Spinoffs, Partial Spinoffs, Rights Offerings, Risk Arbitrage, Merger Securities, Bankruptcy, Restructuring, Recapitalizations, Stub Stocks, LEAPS, and Warrants
I'm guessing that today, the increase in the ease of computers/AI to gather and synthesize this information probably has reduce the mispricing opportunities of some situations. Reading through chapter 7, I kept thinking how one could use AI to assist in the research of the SEC filings and look for the scenarios he described and how that would surely make the field far more competitive. That said, some 'unwanted' probably still looks like 'unwanted', ie Bankruptcy, Merger Securities. Mispricing could still take place where human choice (not math) is still a driver (Spinoffs, Rights Offerings). His original argument of how the small size of some of these situations is a limitation for institutional portfolios is probably still true.
Q3:
I focused on looking at spinoff as those seem more beginner friendly. Here are a few spinoff that look interesting to me:
-- FedEx Freight (probably will be 'efficient' since highly followed)
-- Honeywell (upcoming splits TBD?)
-- Middleby (food processing spinoff
-- KBR (Mission Technology Solutions (MTS))
-- Corteva (parent chemical side, more likely to get dumped than the seed side)
Q4:
FedEx Freight looks interesting to watch.
- Forced selling: Possible, given FedEx Corp's ~80% institutional ownership.
- Insiders/Incentives: John Smith made a career decision to leave his broader Chief Operating Officer role at FedEx Corp to return as CEO of the spinoff. Some indications that leadership is going to be compensated with stock. Demonstrates possible alignment with the new company's performance rather than the just the parent's success. Insiders are not major shareholders in FedEx (this seems like a negative).
- Hidden asset/earnings revealed: It is a profitable business unit within FedEx Corp (~10% of revenue). Despite near-term challenges, FedEx Freight’s scale, margins, and cash flow look to provide a solid foundation for growth.
Q5:
For COMPANY spinoff, use the framework of Joel Greenblatt's 'You Can Be a Stock Market Genius.' and create a report of the following:
- Reading the company's business and operating results from the 10Ks and 10Qs. Report on relevant information specifically related to the operating results of the spinoff segments. Output should include a definition of the spinoff business in one sentence.
- Form 10 for information about a spinoff (be very thorough here, explain uncommon/complicated items). Why is the spinoff happening (read between the lines)?
- Executive stock ownership, stop options and overall compensation from schedule 14A for the spinoff. Who from management wants 'in' and who isn't playing?
- Gather information about the spinoff's business outlook from the prospective of a new business. What's promising and what's concerning?
- Identify if the spinoff will be excluded from indices or if its market cap will be too small for the parent's current institutional holders. Will forced selling be likely?
- Valuation: find the PE of 5 similar businesses in the spinoff industry.
mostly special situations - buy-outs, spin-offs, warrants, LEAPS,
geography - not limited, but better information in US
more quantitative in relation to type of security
time horizon - varies with type of security held
Q 2. Spinoffs
Partial spinoffs
RIghts offerings
Risk arbitrage
Mergers
Bankruptcy
knowing when to sell
Restructuring
Recapitalization - stubs
LEAPS
Warrants
Options
I think most are more accurately priced today given the improvement in technology and ability to see current pricing. Probably the situations more able to create wealth would be in the types of securities more closely ties to the company itself and not a product of mathematical calculations. This would mean the spinoffs would probably offer greater potential values.
Q 3. Dow/DuPont spinoffs
GE - spinoffs - Healthcare, Energy, Aerospace
J & J Kenvue
HP - HPE - Agilent - Keysite
UTX - CARR Otis
3M - Solventum
Q 4. 3m - Solventum
Shareholders would receive one share of Solventum for every 4 shares of 3M held. 3m would keep 19% of the company which would be monetized over a 5 year period. Currently 3M trades around 160 a share post split, and has a dividend yield of 1.8%. It's share price has risen over 25% in the past year. It is also a dividend aristocrat, paying dividends for over 67 years. Solventum operates in the healthcare segment which has not performed well over the last year. The demographics of an aging population should tend to change that dynamic into growth in this sector. It is currently trading at a pe of 11.
Q 5. Provide me with a list of spinoffs which are undervalued as of the date of announcement and the date of spinoff.
Here is the idea-generation prompt I use for special situations (tested on Gemini w/ Deep Research turned on):
"Act as a special situations securities analyst. Come up with a list of current and upcoming special situations, group them by category and briefly describe each. Include categories such as spin-offs, post-bankruptcies, corporate reorganizations, asset conversions, but do not limit yourself to those. In each case explain the timing of the key event"
Question 2: What are the different kinds of special situations that he describes? Which of these areas do you think are likely to be more efficient (less prone to mispricings) today? Which one is less?
Spin-offs
Partial spin-offs
Rights spin-off
Merger securities
Bankruptcy
Odd lots
Corporate restructuring
Recapitalisation - stub stocks
LEAPS
Warrants
Many of these are now specialist areas with quant funds looking for easy (or not so easy) arbitrage situations where the risks can be modelled, calculated and deployed automatically in large volume and therefore lower individual risk. This means some of the more mechanical strategies, like odd lots, no longer work very well. But the basic drivers of stock redistribution from accidental owners to investors do still create windows of opportunity.
Question 3: Find as many current “special situations” from the categories provided by Joel as you can. These do not have to be undervalued, just candidates to look at further that fit the templates that he describes in his book.
Spinoffs
S&P Global — spin off S&P Global Mobility
Medtronic — separate its diabetes business
Continental—plan to make ContiTech an independent entity
McKesson — spin off Medical-Surgical Solutions
Vedanta → demerger into five listed companies
Warner Bros. Discovery → Streaming & Studios + Global Networks
Question 4: If you can, see if you can find one of these special situations that you found in question 3 that you think Joel Greenblatt would consider to be attractive for purchase today. Support your answer with valuation and qualitative analysis as appropriate.
My pick is the Magnum Ice Cream company. This is a classic spinout opportunity here in the UK. The spinout is less than 10% of the value of the parent Unilever, and I think it meets the criteria for a good opportunity.
Background:
Unilever spun out The Magnum Ice Cream Company (TMICC) mainly because the ice cream business is fundamentally different from the rest of Unilever, and management believes both companies can perform better as standalone, more focused organisations. Its stated reasons:
Sharper focus and simpler Unilever: removing ice cream leaves Unilever as a more streamlined group built around four business groups with more similar operating models (Beauty & Wellbeing, Personal Care, Home Care, Foods).
Ice cream has distinct economics/operating needs: it’s highly seasonal and more capital-intensive, with a specialist cold-chain route-to-market (freezers/cabinets, distribution), which creates fewer synergies with the rest of the portfolio.
Better capital allocation and accountability: a standalone TMICC can set its own investment priorities (capex, working capital, leverage) and be judged on the right performance metrics for a pure-play ice cream business.
Clearer equity story / “pure-play” valuation: the demerger gives investors a direct way to own (or not own) a global ice cream leader, rather than it being bundled inside a wider consumer staples group.
Unlocking operational potential: Unilever argues that separating allows TMICC to pursue a dedicated strategy and operating model aimed at improving performance and returns.
I suspect that the aggro of owning Ben & Jerry's with an independent board generating undesirable headlines and some concerns about the future of the market (see below) were unspoken drivers as well.
Opportunity. This company owns all the ice cream brands I've ever heard of, and a lot I have not – 200 of them. It has a 21% share of the market globally. Its main competitors are Froneri (Haagen-Dazs, Drumstick, and Oreo frozen treats, 11% global share). It has a presence in virtually every market, from major market share in the UK to challenger brands in China and India. Looking in the freezer cabinet here in the UK, the only brand they don't own that I know of is Haagen-Dazs, and that brand has a few challenges, as its ownership is complex, and the brand is sold by General Mills outside the US and Froneri in the US and Canada)
I sense the management are excited to escape from the constraints of a large, conservative and slow-moving parent. The MD started his career at Unilever as an ice-cream salesman in 1988 and has worked his way up the ice-cream side of the business ever since. I like management who really know both the company and the products. I note good buying by the directors since it was listed, especially the CFO. In my experience CFOs are risk averse and don't reach into their own pockets without good reason. The CEO has also been a big buyer. The CEO has bought 200,000 shares for a total value of around £2.7M, and the CFO 150,000 for a total value of around £2.0M. That's more than buying a token gesture and shows management's confidence.
Why is the management confident? I see that they are investing in AI to help manage their brands, which makes a lot of sense to me. There is a lot of verbal and visual grunt work in maintaining brands, and streamlining this workflow should generate savings when you have as much brand management to do as this company. Ice cream is a flexible format – family meals, snacks out, small portions adapting to consumers' tastes and wallets. Vegan and vegetarian alternatives are good – coconut is an excellent substitute for dairy, and protein can easily be added via whey without changing the product too much. With strong brands and the flexibility to innovate within those brands, I suspect management are confident that they can expand and grow both sales and margins in the future.
Valuation.
This is a straightforward business to value. It has mature brands and an established manufacturing and distribution network. It generates good FCFE, and this makes a DCF model easy to build. Using broker forecasts for the next few years, then management's 3-5% growth estimate out to 10 years, a WACC of 8 and a terminal growth of 2.5% with debt of £3bn approx. gives a valuation of 8.5bn. Current market cap £7.5bn Compared to peers it is cheap, as these kinds of companies tend to attract high valuations due to their stable cash flows, resilience in recessions – cheap treats to get through bad times are a classic countercyclical play – and long-lasting brands. The ice cream we eat in childhood sticks in our minds all the way to the grave. This kind of cashflow resilience supports investment and good payouts to investors and is the right kind of "margin of safety" we should be looking for.
A peer comparative valuation comes out around 10bn, but treat it with caution, as it always depends on which peers you pick and how the market perceives those peers.
Share price performance.
Textbook. dropped a few days after listing with high volumes as the first "we can't own this" shareholders dumped. Then a recovery after a few days as new shareholders start to see some merit and new trackers start to buy in – it's an FTSE100 company, so those trackers have to buy. Volume steadily declines along with the price over Christmas, which is when the directors make their purchases; prices recover, and there is a modest improvement in January. Now trading close to highs.
Risks
Demerging costs
increased standalone overheads
untried management
GLP1 agonists affecting consumption (23% of US households have someone on these drugs, and where the US leads, others will follow).
Ben & Jerry's independent board damages the company's reputation by generating negative headlines.
Ageing brands – maintaining relevance and marketing to new audiences in new ways are not guaranteed.
I think the risks are manageable, and I can say that I don't know many companies that have such a dominant position in a brand category as this. Brands like this have earnings power. That's why Warren Buffett owns Coke and Dairy Queen. These brands take multi-decades to build. I remember giving Callipo's to my children, being served Wall's ice cream at home (founded in 1922) when I was a child myself, and being given Cornetto's for the first time in my teens, which were a treat because they were much more expensive – in the UK the brand was famously marketed by Pavarotti singing about them in the '80s, "Just one Cornetto." I guarantee any older adult in the UK would know it. The real question is whether the new management can maintain and grow these legacy brands in a changing world.
Question 5: Come up with an AI prompt based on Joel Greenblatt’s approach.
"make a list of Spinoffs / complex separations due to happen in 2026"
Really appreciate your deep dive on Magnum. I had taken a look at it recently (not a deep one). How do you think whether the price/value discrepancy (7.5B vs 8.5B according to your analysis) offers you sufficient margin of safety?
On its own, it does not look like a very impressive margin, and I would normally want more. However, the full story is a bit more complex, but as I had already written quite a lot in my answer, I thought I would cut down on this aspect, as it's mostly mechanical calculations and comparatives and not so relevant to the reading.
I have built in a number of conservative assumptions to get to my valuation of £8.5bn.
If you calculate the WACC for MICC, it comes out less than 7%, not 8%. This is fair because the equity component has a low volatility: food companies are not very volatile, tend to have very long brand lifetimes, and are very resistant to business cycles.
The debt component is also low. The debt that MICC raised in November was 7 times oversubscribed and attracted these rates:
2.750% — due Feb 2029
3.250% — due Nov 2031
3.750% — due Nov 2034
4.000% — due Nov 2037
If you use a WACC of 7, not 8, you get a much increased valuation of £10.9bn.
FCF assumptions.
In the FCF assumptions, I have assumed around 3% growth over 10 years. Management are targeting 3-5%.
3% - £8.4bn
4% - £9.2bn
5% - £10.1bn
If they hit the middle, again the value is significantly increased.
They have also targeted a margin increase of 40-60 bp, which I ignored as I could not see any reason for it other than an aspiration.
Of course, one of the problems with DCF is how sensitive it is to small changes in the initial assumptions, as these numbers illustrate, and there are plenty of different assumptions in the model which can do this, for example, an effective tax rate from 26%, which is the current assumption. Put it up to 30% – not impossible in today's world of tariffs and high government debt – and the valuation moves from 8.5bn to 7.8bn. Moving capex from 5% of sales, which is what I have assumed and again is conservative compared to management, has a large effect. At 6% of sales from 2027 onwards, it drops the valuation to 7.1bn.
Finally, if I use a WACC of 7 and use the management guidance straight without any conservative trimming, the valuation comes out at 15bn.
This does not make DCF calculations useless, but it is why people are rightly suspicious of them.
The other way to value is by comparisons with others in the marketplace. This has a different set of biases and problems, mostly in choosing relevant comparators.
The closest in the UK is Associated British Food, a somewhat larger and long-established branded food company. Not the best comparison, as they also own a retail brand, Primark, which sells value clothes on the high street, a business with a very different value profile. Their results recently have been poor, so they are lower priced than they were historically. Over the last 20 years the average PE has been 15 and is now 10. Even so, on a cash flow basis, if MICC were on the same rating, they would be trading at 11.5bn.
in Ireland is the Kerry Group, with a PE of 16 and a similar mature profile and a more comparable business there on a cashflow basis; if MICC were on the same rating, they would be trading at 12.3bn.
My own instinct is that if companies as stodgy as these, with only very modest long-term returns, can still hold their valuations at these levels, then MICC will have to do really badly to remain at the current level.
Do you have any guidance or opinion on what a reasonable margin of safety is? Or a reasonable targeted return? For most of my projects I aim for an IRR of 15%, so for shares, a 40% undervaluation has a couple of years or so to close.
I don't intentionally make an investment with an IRR below 12% (for the highest quality businesses), although of course I make mistakes and do end up with lower results when I do.
Question 1:
Joel Greenblatt, is a highly specialized, opportunistic investor. He thrives in “special situations” (spinoffs, restructurings, bankruptcies, mergers), blending deep fundamental analysis with contrarian patience. His style maps across dimensions as opportunistic, research-intensive, event-driven, and risk-aware, rather than broad market or momentum-driven.
Source of Edge : Information inefficiency: Finds value in overlooked, complex corporate events
Research depth: Gains edge by reading filings others ignore.
Time Horizon : long enough for special situations to resolve.
Risk Orientation : Asymmetric bets: Looks for limited downside with large upside., focuses on event-specific catalysts.
Breadth vs. Focus : Concentrated: Prefers a handful of high-conviction special situations.
Analytical Style : Forensic detail: Reads proxy statements, spin-off docs, bankruptcy filings.
Flexibility : Adaptive opportunist: Moves across spinoffs, mergers, distressed debt, rights offerings.
Question 2:
1) Spinoffs
a) Parent companies distribute shares of a subsidiary to existing shareholders.
b) Often neglected because institutions sell off small or “non-core” spinoffs. Forced buying v Forced selling concepts
c) Greenblatt shows how insiders’ incentives and hidden gems can create value.
2) Mergers & Risk Arbitrage
a) Buying target companies at discounts to deal price.
b) Profiting if the merger closes successfully.
c) Requires assessing deal certainty, regulatory risk, and financing.
3) Restructurings & Recapitalizations
a) Companies changing capital structure (e.g., issuing debt, buybacks, asset sales).
b) Can unlock hidden value or create mispricings.
4) Bankruptcies & Distressed Securities
a) Buying debt or equity of companies emerging from bankruptcy.
b) Potential for huge upside if assets are mispriced during distress.
5) Rights Offerings & Warrants
a) Opportunities when companies issue rights to existing shareholders.
b) Warrants/options tied to restructurings can be mispriced.
6) LEAPS (Long-Term Equity Anticipation Securities)
a) Using long-dated options to capture value in special situations with limited downside.
7) Stub Stocks
a) Residual equity left after partial spin-offs or recapitalizations.
b) Often overlooked and mispriced
Question 3 & 4:
The Lemon Tree–Fleur Hotels restructuring is a textbook Greenblatt-style case: an asset-light vs. asset-heavy split with private equity involvement, creating two distinct vehicles that investors can analyze separately. Below is a structured list of recent candidates across Joel Greenblatt’s categories.
Lemon Tree Hotels (asset-light) → management, brand, loyalty, distribution.
• Fleur Hotels (asset-heavy) → property ownership and development.
• Catalyst: Warburg Pincus acquired APG’s 41% stake in Fleur and committed ₹960 crore in new equity.
• Why it fits Greenblatt’s playbook: Clear separation of business models, private equity capital infusion, and potential listing of Fleur within 12–15 months. This creates a “special situation” where investors can value each platform differently
Question 5:
1) "For [COMPANY] spinoff, apply Joel Greenblatt’s framework from You Can Be a Stock Market Genius and create a comprehensive report. Use SEC filings (10-K, 10-Q, Form 10, Schedule 14A), analyst commentary, and industry comparables. The report should include the following sections:"
2) Business & Operating Results (10-Ks / 10-Qs)
a) Extract segment-level operating results tied to the spinoff.
b) Highlight revenue, margins, growth trends, and capital intensity.
c) Provide a one-sentence definition of the spinoff’s business model.
3) Form 10 Analysis
a) Summarize the spinoff’s structure, debt allocation, and unusual disclosures.
b) Explain why the spinoff is happening—read between the lines (e.g., regulatory pressure, unlocking hidden value, shedding low-growth assets).
c) Clarify complicated items (tax treatment, contingent liabilities, separation agreements).
4) Management Incentives (Schedule 14A)
a) Detail executive stock ownership, options, restricted stock units, and compensation.
b) Identify who is “all in” on the spinoff and who is not participating.
c) Discuss alignment (or misalignment) between management incentives and shareholder value creation.
5) Business Outlook
a) Assess the spinoff as a standalone company:
i) Promising factors (market tailwinds, niche dominance, cost advantages).
ii) Concerning factors (customer concentration, leverage, regulatory risk).
b) Compare to parent company’s historical positioning.
6) Index & Institutional Dynamics
a) Evaluate whether the spinoff will be excluded from major indices (S&P, Russell).
b) Assess market cap relative to institutional mandates—will forced selling occur?
c) Discuss potential mispricing opportunities due to mechanical selling.
Love your prompt idea. Have you tried it in practice, and if so how have you found the output?
Q1:
https://docs.google.com/document/d/e/2PACX-1vS8wnXKPg2eqZ4XAM2dSAi7rIm7u7EDjRZ64jI4tQdWdHAXXOnhOWkP60SlnlB8_G4tMg4iZOStUcJx/pub
Q2:
Special situations included Spinoffs, Partial Spinoffs, Rights Offerings, Risk Arbitrage, Merger Securities, Bankruptcy, Restructuring, Recapitalizations, Stub Stocks, LEAPS, and Warrants
I'm guessing that today, the increase in the ease of computers/AI to gather and synthesize this information probably has reduce the mispricing opportunities of some situations. Reading through chapter 7, I kept thinking how one could use AI to assist in the research of the SEC filings and look for the scenarios he described and how that would surely make the field far more competitive. That said, some 'unwanted' probably still looks like 'unwanted', ie Bankruptcy, Merger Securities. Mispricing could still take place where human choice (not math) is still a driver (Spinoffs, Rights Offerings). His original argument of how the small size of some of these situations is a limitation for institutional portfolios is probably still true.
Q3:
I focused on looking at spinoff as those seem more beginner friendly. Here are a few spinoff that look interesting to me:
-- FedEx Freight (probably will be 'efficient' since highly followed)
-- Honeywell (upcoming splits TBD?)
-- Middleby (food processing spinoff
-- KBR (Mission Technology Solutions (MTS))
-- Corteva (parent chemical side, more likely to get dumped than the seed side)
Q4:
FedEx Freight looks interesting to watch.
- Forced selling: Possible, given FedEx Corp's ~80% institutional ownership.
- Insiders/Incentives: John Smith made a career decision to leave his broader Chief Operating Officer role at FedEx Corp to return as CEO of the spinoff. Some indications that leadership is going to be compensated with stock. Demonstrates possible alignment with the new company's performance rather than the just the parent's success. Insiders are not major shareholders in FedEx (this seems like a negative).
- Hidden asset/earnings revealed: It is a profitable business unit within FedEx Corp (~10% of revenue). Despite near-term challenges, FedEx Freight’s scale, margins, and cash flow look to provide a solid foundation for growth.
Q5:
For COMPANY spinoff, use the framework of Joel Greenblatt's 'You Can Be a Stock Market Genius.' and create a report of the following:
- Reading the company's business and operating results from the 10Ks and 10Qs. Report on relevant information specifically related to the operating results of the spinoff segments. Output should include a definition of the spinoff business in one sentence.
- Form 10 for information about a spinoff (be very thorough here, explain uncommon/complicated items). Why is the spinoff happening (read between the lines)?
- Executive stock ownership, stop options and overall compensation from schedule 14A for the spinoff. Who from management wants 'in' and who isn't playing?
- Gather information about the spinoff's business outlook from the prospective of a new business. What's promising and what's concerning?
- Identify if the spinoff will be excluded from indices or if its market cap will be too small for the parent's current institutional holders. Will forced selling be likely?
- Valuation: find the PE of 5 similar businesses in the spinoff industry.
I have been keeping an eye on Middleby and it will be interesting to see if any inefficiencies develop in that one.
Q 1. not deep research - but does know terms
may be concentrated
mostly special situations - buy-outs, spin-offs, warrants, LEAPS,
geography - not limited, but better information in US
more quantitative in relation to type of security
time horizon - varies with type of security held
Q 2. Spinoffs
Partial spinoffs
RIghts offerings
Risk arbitrage
Mergers
Bankruptcy
knowing when to sell
Restructuring
Recapitalization - stubs
LEAPS
Warrants
Options
I think most are more accurately priced today given the improvement in technology and ability to see current pricing. Probably the situations more able to create wealth would be in the types of securities more closely ties to the company itself and not a product of mathematical calculations. This would mean the spinoffs would probably offer greater potential values.
Q 3. Dow/DuPont spinoffs
GE - spinoffs - Healthcare, Energy, Aerospace
J & J Kenvue
HP - HPE - Agilent - Keysite
UTX - CARR Otis
3M - Solventum
Q 4. 3m - Solventum
Shareholders would receive one share of Solventum for every 4 shares of 3M held. 3m would keep 19% of the company which would be monetized over a 5 year period. Currently 3M trades around 160 a share post split, and has a dividend yield of 1.8%. It's share price has risen over 25% in the past year. It is also a dividend aristocrat, paying dividends for over 67 years. Solventum operates in the healthcare segment which has not performed well over the last year. The demographics of an aging population should tend to change that dynamic into growth in this sector. It is currently trading at a pe of 11.
Q 5. Provide me with a list of spinoffs which are undervalued as of the date of announcement and the date of spinoff.
Here is the idea-generation prompt I use for special situations (tested on Gemini w/ Deep Research turned on):
"Act as a special situations securities analyst. Come up with a list of current and upcoming special situations, group them by category and briefly describe each. Include categories such as spin-offs, post-bankruptcies, corporate reorganizations, asset conversions, but do not limit yourself to those. In each case explain the timing of the key event"
Thank you Gary. I also have your interview with Bogumil up next to listen to.
Me too!
Question 1: Please “map” Joel as an investor on as many dimensions of an investment style as possible.
For clarity I have removed the dimensions that don't really apply to him.
https://datawrapper.dwcdn.net/3VkwP/1/
Question 2: What are the different kinds of special situations that he describes? Which of these areas do you think are likely to be more efficient (less prone to mispricings) today? Which one is less?
Spin-offs
Partial spin-offs
Rights spin-off
Merger securities
Bankruptcy
Odd lots
Corporate restructuring
Recapitalisation - stub stocks
LEAPS
Warrants
Many of these are now specialist areas with quant funds looking for easy (or not so easy) arbitrage situations where the risks can be modelled, calculated and deployed automatically in large volume and therefore lower individual risk. This means some of the more mechanical strategies, like odd lots, no longer work very well. But the basic drivers of stock redistribution from accidental owners to investors do still create windows of opportunity.
Question 3: Find as many current “special situations” from the categories provided by Joel as you can. These do not have to be undervalued, just candidates to look at further that fit the templates that he describes in his book.
Spinoffs
S&P Global — spin off S&P Global Mobility
Medtronic — separate its diabetes business
Continental—plan to make ContiTech an independent entity
McKesson — spin off Medical-Surgical Solutions
Vedanta → demerger into five listed companies
Warner Bros. Discovery → Streaming & Studios + Global Networks
Corteva → crop protection vs seed “SpinCo”
Kraft Heinz → split into two
Resideo → spin-off ADI Global Distribution
KBR → spin-off Mission Technology Solutions (MTS)
Merger securities
Union Pacific (acquirer) / Norfolk Southern (target) — stock + cash consideration
Boston Scientific (acquirer) / Penumbra (target)
Kimberly-Clark (acquirer) / Kenvue (target)
Boeing (acquirer) / Spirit AeroSystems (target)
Bankruptcy
Corporate restructuring
Recapitalisation - stub stocks
LEAPS
Warrants
Question 4: If you can, see if you can find one of these special situations that you found in question 3 that you think Joel Greenblatt would consider to be attractive for purchase today. Support your answer with valuation and qualitative analysis as appropriate.
My pick is the Magnum Ice Cream company. This is a classic spinout opportunity here in the UK. The spinout is less than 10% of the value of the parent Unilever, and I think it meets the criteria for a good opportunity.
Background:
Unilever spun out The Magnum Ice Cream Company (TMICC) mainly because the ice cream business is fundamentally different from the rest of Unilever, and management believes both companies can perform better as standalone, more focused organisations. Its stated reasons:
Sharper focus and simpler Unilever: removing ice cream leaves Unilever as a more streamlined group built around four business groups with more similar operating models (Beauty & Wellbeing, Personal Care, Home Care, Foods).
Ice cream has distinct economics/operating needs: it’s highly seasonal and more capital-intensive, with a specialist cold-chain route-to-market (freezers/cabinets, distribution), which creates fewer synergies with the rest of the portfolio.
Better capital allocation and accountability: a standalone TMICC can set its own investment priorities (capex, working capital, leverage) and be judged on the right performance metrics for a pure-play ice cream business.
Clearer equity story / “pure-play” valuation: the demerger gives investors a direct way to own (or not own) a global ice cream leader, rather than it being bundled inside a wider consumer staples group.
Unlocking operational potential: Unilever argues that separating allows TMICC to pursue a dedicated strategy and operating model aimed at improving performance and returns.
I suspect that the aggro of owning Ben & Jerry's with an independent board generating undesirable headlines and some concerns about the future of the market (see below) were unspoken drivers as well.
Opportunity. This company owns all the ice cream brands I've ever heard of, and a lot I have not – 200 of them. It has a 21% share of the market globally. Its main competitors are Froneri (Haagen-Dazs, Drumstick, and Oreo frozen treats, 11% global share). It has a presence in virtually every market, from major market share in the UK to challenger brands in China and India. Looking in the freezer cabinet here in the UK, the only brand they don't own that I know of is Haagen-Dazs, and that brand has a few challenges, as its ownership is complex, and the brand is sold by General Mills outside the US and Froneri in the US and Canada)
I sense the management are excited to escape from the constraints of a large, conservative and slow-moving parent. The MD started his career at Unilever as an ice-cream salesman in 1988 and has worked his way up the ice-cream side of the business ever since. I like management who really know both the company and the products. I note good buying by the directors since it was listed, especially the CFO. In my experience CFOs are risk averse and don't reach into their own pockets without good reason. The CEO has also been a big buyer. The CEO has bought 200,000 shares for a total value of around £2.7M, and the CFO 150,000 for a total value of around £2.0M. That's more than buying a token gesture and shows management's confidence.
Why is the management confident? I see that they are investing in AI to help manage their brands, which makes a lot of sense to me. There is a lot of verbal and visual grunt work in maintaining brands, and streamlining this workflow should generate savings when you have as much brand management to do as this company. Ice cream is a flexible format – family meals, snacks out, small portions adapting to consumers' tastes and wallets. Vegan and vegetarian alternatives are good – coconut is an excellent substitute for dairy, and protein can easily be added via whey without changing the product too much. With strong brands and the flexibility to innovate within those brands, I suspect management are confident that they can expand and grow both sales and margins in the future.
Valuation.
This is a straightforward business to value. It has mature brands and an established manufacturing and distribution network. It generates good FCFE, and this makes a DCF model easy to build. Using broker forecasts for the next few years, then management's 3-5% growth estimate out to 10 years, a WACC of 8 and a terminal growth of 2.5% with debt of £3bn approx. gives a valuation of 8.5bn. Current market cap £7.5bn Compared to peers it is cheap, as these kinds of companies tend to attract high valuations due to their stable cash flows, resilience in recessions – cheap treats to get through bad times are a classic countercyclical play – and long-lasting brands. The ice cream we eat in childhood sticks in our minds all the way to the grave. This kind of cashflow resilience supports investment and good payouts to investors and is the right kind of "margin of safety" we should be looking for.
A peer comparative valuation comes out around 10bn, but treat it with caution, as it always depends on which peers you pick and how the market perceives those peers.
Share price performance.
Textbook. dropped a few days after listing with high volumes as the first "we can't own this" shareholders dumped. Then a recovery after a few days as new shareholders start to see some merit and new trackers start to buy in – it's an FTSE100 company, so those trackers have to buy. Volume steadily declines along with the price over Christmas, which is when the directors make their purchases; prices recover, and there is a modest improvement in January. Now trading close to highs.
Risks
Demerging costs
increased standalone overheads
untried management
GLP1 agonists affecting consumption (23% of US households have someone on these drugs, and where the US leads, others will follow).
Ben & Jerry's independent board damages the company's reputation by generating negative headlines.
Ageing brands – maintaining relevance and marketing to new audiences in new ways are not guaranteed.
I think the risks are manageable, and I can say that I don't know many companies that have such a dominant position in a brand category as this. Brands like this have earnings power. That's why Warren Buffett owns Coke and Dairy Queen. These brands take multi-decades to build. I remember giving Callipo's to my children, being served Wall's ice cream at home (founded in 1922) when I was a child myself, and being given Cornetto's for the first time in my teens, which were a treat because they were much more expensive – in the UK the brand was famously marketed by Pavarotti singing about them in the '80s, "Just one Cornetto." I guarantee any older adult in the UK would know it. The real question is whether the new management can maintain and grow these legacy brands in a changing world.
Question 5: Come up with an AI prompt based on Joel Greenblatt’s approach.
"make a list of Spinoffs / complex separations due to happen in 2026"
Really appreciate your deep dive on Magnum. I had taken a look at it recently (not a deep one). How do you think whether the price/value discrepancy (7.5B vs 8.5B according to your analysis) offers you sufficient margin of safety?
On its own, it does not look like a very impressive margin, and I would normally want more. However, the full story is a bit more complex, but as I had already written quite a lot in my answer, I thought I would cut down on this aspect, as it's mostly mechanical calculations and comparatives and not so relevant to the reading.
I have built in a number of conservative assumptions to get to my valuation of £8.5bn.
If you calculate the WACC for MICC, it comes out less than 7%, not 8%. This is fair because the equity component has a low volatility: food companies are not very volatile, tend to have very long brand lifetimes, and are very resistant to business cycles.
The debt component is also low. The debt that MICC raised in November was 7 times oversubscribed and attracted these rates:
2.750% — due Feb 2029
3.250% — due Nov 2031
3.750% — due Nov 2034
4.000% — due Nov 2037
If you use a WACC of 7, not 8, you get a much increased valuation of £10.9bn.
FCF assumptions.
In the FCF assumptions, I have assumed around 3% growth over 10 years. Management are targeting 3-5%.
3% - £8.4bn
4% - £9.2bn
5% - £10.1bn
If they hit the middle, again the value is significantly increased.
They have also targeted a margin increase of 40-60 bp, which I ignored as I could not see any reason for it other than an aspiration.
Of course, one of the problems with DCF is how sensitive it is to small changes in the initial assumptions, as these numbers illustrate, and there are plenty of different assumptions in the model which can do this, for example, an effective tax rate from 26%, which is the current assumption. Put it up to 30% – not impossible in today's world of tariffs and high government debt – and the valuation moves from 8.5bn to 7.8bn. Moving capex from 5% of sales, which is what I have assumed and again is conservative compared to management, has a large effect. At 6% of sales from 2027 onwards, it drops the valuation to 7.1bn.
Finally, if I use a WACC of 7 and use the management guidance straight without any conservative trimming, the valuation comes out at 15bn.
This does not make DCF calculations useless, but it is why people are rightly suspicious of them.
The other way to value is by comparisons with others in the marketplace. This has a different set of biases and problems, mostly in choosing relevant comparators.
The closest in the UK is Associated British Food, a somewhat larger and long-established branded food company. Not the best comparison, as they also own a retail brand, Primark, which sells value clothes on the high street, a business with a very different value profile. Their results recently have been poor, so they are lower priced than they were historically. Over the last 20 years the average PE has been 15 and is now 10. Even so, on a cash flow basis, if MICC were on the same rating, they would be trading at 11.5bn.
in Ireland is the Kerry Group, with a PE of 16 and a similar mature profile and a more comparable business there on a cashflow basis; if MICC were on the same rating, they would be trading at 12.3bn.
My own instinct is that if companies as stodgy as these, with only very modest long-term returns, can still hold their valuations at these levels, then MICC will have to do really badly to remain at the current level.
Do you have any guidance or opinion on what a reasonable margin of safety is? Or a reasonable targeted return? For most of my projects I aim for an IRR of 15%, so for shares, a 40% undervaluation has a couple of years or so to close.
I don't intentionally make an investment with an IRR below 12% (for the highest quality businesses), although of course I make mistakes and do end up with lower results when I do.