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The field of special situations can be a happy hunting ground. As Joel Greenblatt details in his book You Can Be a Stock Market Genius, special-situation investing led him to 50% annualized returns for a decade. That type of return transforms a $1 investment into $52 in just 10 years.

Such special situations are created by transactions that transform the business -- spinoffs, reorganizations, and recapitalizations, to name a few. But the value created by such transactions often isn't reflected in financial statements, so agile investors can get a jump -- and a good price -- on these stocks before they appreciate to full value. Also, these situations can be complicated, but it's this transactional complexity that often creates value.

So below are two spinoffs that I'll be watching closely.




ConocoPhillips (NYSE: COP)

Refining business

First half of 2012

Ralcorp (NYSE: RAH)

Post cereal business

Late 2011

Once is a coincidence, twice is a trend. So it looks like Conoco might be setting the fashion of integrated oil companies spinning off their refining divisions. Conoco is following in the footsteps of Marathon Oil (NYSE: MRO), which completed its own spin of Marathon Petroleum (NYSE: MPC) last month. The move will leave Conoco as a pure exploration and production company and will create the largest independent U.S. refiner and largest E&P. Marathon shares performed nicely from the time of the spinoff announcement, and Conoco shares have also gone up following the news on Thursday.

With upward pressure on oil prices and narrow margins for many refiners, some analysts are speculating that supermajors ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), and BP (NYSE: BP) could be contemplating spinoffs of their refinery operations in order to juice shareholder returns. One Bloomberg report suggested that BP was under pressure to follow Marathon and Conoco. However, Chevron and BP have said they have no plans to spin off their refining operations. Add ConocoPhillips to your watchlist by clicking here.

Ralcorp announced that it would spin off its Post cereals unit in four to six months. The move comes about four years after the unit was acquired for $1.65 billion. The spinoff will take on as much as $1.2 billion in new debt, with perhaps $1 billion of that cash being funneled to Ralcorp before the spin. Post generated $958 million in sales over the last four quarters. Ralcorp is in the midst of a takeover attempt by ConAgra, which has offered $4.9 billion for the company. Add Ralcorp to your watchlist by clicking here.

Interested in these stocks or have another stock to share? Join me on my discussion board and follow me on Twitter (@TMFRoyal).

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.