Blogs to watch (part 25): Stock Spin-off Investing

It was a cold winter night, at just -14 degrees Celsius (7 degrees Fahrenheit). The roads were covered in a thick layer of ice, and taxis in suitably short supply.

Still, I really wanted to make it out to Waltham, a western metropolitan suburb of Boston, to see Rich Howe. As a fellow blogger, investment analyst and entrepreneur, I had long wanted to meet up with Rich, but the pandemic had kept it from happening. During my current trip to the east coast of the US, we finally got together for a beer among colleagues.

Here is why you should add Rich's blog, Stock Spin-off Investing​, to your radar - all the more so if you are considering to publish your own subscription-based business, blog, or newsletter.

Some truly independent thoughts

Rich is someone you might remember from another of my Weekly Dispatches: "Thungela – 350% quick profit from green insanity". Thungela (ISIN ZAE000296554), the coal company that was spun off from Anglo American (ISIN GB00B1XZS820), subsequently produced stunning returns within a few short months.

This was a truly contrarian – if not even controversial – investment opportunity. At a time when corporate fund managers sold out for a pity because they wanted to look "green" and virtuous, Rich loaded up and made Thungela his largest position. He also took readers of his blog along for the ride. Stock Spin-off Investing offered the most in-depth analysis of the Thungela opportunity that you could find at the time.

Blogs and investment newsletters don't come with the kind of restrictions and groupthink that large corporations suffer from. They are free to offer truly independent thought.

Rich excels at that, and he has turned it into an exemplary subscription-based business.

Fancy building a six-figure sideline yourself?

Among bloggers and content creators, it has become a bit of a thing to share your learnings. By now, my free advice to aspiring bloggers has inspired more than one other investor to start their own blog or spend more time on expanding their existing publication.

I appreciate it when others also share their experience, because I'd love to see our cottage industry expand. The more successful independent publications are out there, the larger the pool of people who follow our sector.

On 3 November 2021, Rich spilled the beans when he published "How I Grew My Paid Newsletter to Over $114K of Recurring Revenue".

After leaving his corporate career, Rich had launched his service before Substack became cool. Fast-forward three years, and he has 330 paying members with an annualised revenue of USD 114,000. Nota bene, Stock Spin-off Investing is a side hustle for Rich (he also manages his own portfolio and is a partner in a private equity firm). He grew this subscriber base without any paid advertising!

Who would say "no" to a six-figure annual income on the side?

The investments featured on Stock Spin-off Investing have produced an average return of +24.6%, compared to +10% for the S&P 500 (figures as per February 2022). Chances are, Rich will continue to grow his readership. Due to a lack of aggressive marketing, Stock Spin-off Investing enjoys a high reader "retention rate" and a low "churn". These are terms that I already mentioned and explained in my current three-part series about subscription-based businesses (part 3 is due out next week).

In "How I Grew My Paid Newsletter to Over $114K of Recurring Revenue", Rich openly shares what has worked for building his readership and what hasn't. For anyone considering to do something similar, this article is akin to getting a free consultancy.

Last but far from least, Rich offers a lot of valuable investment advice.

Why spin-off investing is a lucrative niche

Spin-offs are a niche within investing, but a lucrative one.

Rich once analysed the returns of the Bloomberg U.S. Spin-off Index vs the returns of the S&P 500. He found that from December 2005 to May 2018, the Bloomberg U.S. Spin-off Index generated a 511% return, outpacing the S&P 500 by 314%.

Various other studies, including from Credit Suisse and J.P. Morgan, also found that spin-offs produced above average returns.

How come?

Spin-offs are often complex transactions, and they are also somewhat unusual. Not many investors are following them. If an investment niche is underfollowed, it gives you the chance to be ahead of the crowd.

Stock Spin-off Investing is a resource for anyone who wants to learn more about this sector in general or invest in specific opportunities, but doesn't have the time to do all the digging. Rich shares the lessons he has learned, and he saves his subscribers the time to sort through the spin-off newsflow.

A Stock Spin-off Investing subscription costs USD 67 per month, or USD 629 per year. This makes it the most expensive service I have ever featured on "Blogs to watch", but I am totally comfortable doing so for three reasons:

1. Spin-off investing is a niche area rather than a mass product, and as such will have to be sold at a higher price point to be viable.
2. Rich has proven that he delivers real value and outperformance.
3. Tying in with the first point, Rich even offers his subscribers direct, candid access to himself. He organises monthly Zoom calls to discuss specific opportunities and address other questions. No trek through ice and snow required.

Rich doesn't hide behind customer service representatives and anonymous hotlines, because he sells an authentic, genuine product.

With that in mind, I am glad that we got to meet at long last.

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