American Standard Companies Inc. (NYSE:ASD) announced last week that its spin-off of WABCO Holdings Inc. (NYSE:WBC) is set to take place on July 31st. Under the terms of the deal, shareholders are American Standard on record July 12th will receive one share of WBC for every three shares of ASD that they own. Investors and shareholders should watch this spin-off as it presents several opportunities to profit that we will explore in this article.

WABCO is a leading provider of technologically advanced breaking, stability, suspension and transmission control systems that has been around since 1869. Their products include a range of control systems that improve vehicle safety and reduce overall vehicle operating costs for the world's leading truck, trailer and bus manufacturers as well as select passenger car manufacturers. The company's strong competitive and financial condition make it a great stock to own.

Investors may find it worth noting that spin-offs in general tend to outperform the overall market during their first couple of years as an independent public company (just check out this article by the Journal of Investment Management). The reasoning behind this is simply that many people who receive the shares do not want them so they immediately turn around and sell - creating a discount.

The company is also much more nimble, being independent from its parent, and therefore may be able to increase its revenues and cut costs. It is also worth nothing that insiders are often given a high stake in the new spin-off, which provides them incentive to jump the stock price. We already know that WABCO is an excellent candidate with management's sizable stake in the company with a leading market position.

In the end, investors should carefully watch this stock after its July 31st spin-off while existing shareholders should consider holding onto their shares for awhile. Evidence has shown that spin-offs do tend to outperform the market in certain instances - and WABCO appears to be a poster child for these cases. This makes WBC a stock worth watching over the next year!