CITI: These 14 companies are ripe to be broken up — and history shows a ‘highly effective strategy’ for investors

Sometimes it makes more sense for a big company to break itself up.

It’s especially true when one segment of the business is underperforming. And when managements reach this decision — or are forced by activist shareholders — they provide an opening for investors to increase the valuation of the spun-off entities.

“Spin-offs are good news for shareholders,” Robert Buckland, an equity strategist at Citi, said in a note on Wednesday.

“Buying shares in companies that spin-off assets has been a highly effective strategy. Citi analysis shows that historically, both the parent and the spun-off company outperform in the year after the announcement.”

Many spin-off candidates start outperforming before the announcements, Buckland said, as investors speculate on the news.

Citi’s analysts identified 14 US companies that could unlock more value in a spin-off, mostly in the industrials and information technology sectors. Here are the stocks to keep an eye on, ranked in ascending order by market cap.