Thursday, November 25, 2010

3 takeover targets to make you %100 richer!

By Nanacy Zambell

Fellow Investor,

The financial crisis put everyone on red alert. Purse strings were tightened up, and M&A all but dried up. But companies were still growing—and stashing all that extra cash on their balance sheets.

The gig is up.

Recently, we’ve seen more mergers and acquisition activity than… well, we’ve seen in two years! Corporations are being urged to do something productive with their cash hoard—or risk the wrath of shareholders.

Needless to say, the floodgates have opened up…

  • BHP Billiton recently made a hostile $39 billion tender offer for Potash. While the company rejected the bid, its shares have popped more than 34% in just one week.

  • Chip giant Intel went out on a limb offering up a $7.7 billion deal for Internet security company McAfee. McAfee’s shares soared on the deal, jumping 57% in just 5 days.
  • And then there’s 3PAR, a data storage company that was at the center of a bidding war between Dell and Hewlett-Packard. It’s no surprise 3PAR’s shares skyrocketed more than 180% in just 11 days.

  • The biggest winners from all this M&A activity? It’s not the takeover targets or even the bidders. The biggest winners have been shareholders—34% in 7 days… 57% in 5 days… 180% in 11 days.

Now, it’s time for you to grab your share of the pie.

Cash In on the M&A Heat Wave!

There is little doubt that since March 2009 the stock market has been a hotbed of activity!

Savvy investors (like us) have realized that despite the gloom and doom predictions in the mainstream media—as well as significant market volatility—there is money to be made. And that's just what we’re doing in Buried Treasures Under $10.

We’ve booked a lot of profits by carefully selecting fundamentally strong companies whose revenues and earnings were beginning to take off—even during the recession—and whose shares were so undervalued that it was just a matter of time before they began to increase in value. And I want you to know that I’m just thrilled with our results!

  • 125% in Power-One (half position) in 4 months
    105% in TIBCO Software in 10 months
    99% in Aruba Networks (half position) in 11 months
    82% in Ares Capital Corp. in 9 months
    65% in Saba Software in 10 months

But this is only the beginning for us!

The new wave of mergers and acquisitions (M&A) is already upon us in full force and is offering untold opportunities for us during the next year or so. In fact, I've reviewed many financial reports in order to ferret out the best sectors and companies with “the right stuff” that make them attractive takeover candidates.

And what I've uncovered are three gems.

These are not distressed companies that some private equity hotshot thinks he or she can turn around, bust up or suck dry for a big tax write-off.

These five don’t need to be bought out to survive. Each sports strong financials, low or no debt, healthy sales, growing revenue and steady cash flows in industries that are exploding with growth.

Artisan beers... 3-D movies... language translation...

es, language translation (I’ll explain in a moment), and healthcare staffing and specialty electronics and recycling, too.

Diverse as these three are, each offers the same thing healthy suitors crave, which is: expansion-strategy shortcuts.

3 Hidden Takeover Targetsfor the Fourth Quarter

My Buried Treasures Under $10 service is loaded with potential acquisition candidates. The reason why is simple: All are deeply undervalued growing businesses that dominate their respective corners of the market.

Just take a look at three of my favorites:

Takeover Target #1:
Ballantyne Strong, Inc.

Ballantyne Strong Inc. (AMEX: BTN) is a leader in the transition to digital and 3-D, and it is handsomely profiting as the transition takes hold across the industry.

Here’s why: BTN can completely outfit a theater, from top to bottom. It's become a one-stop shopping mall for folks who want to get a movie theater up-and-running, or to retrofit an older establishment with digital or 3-D technology.

So it's not surprising that the company is expected to be integral to the digital transition for both Regal Entertainment and Cinemark Holdings. Digital products have already grown to 39% of the company's sales, up from 23% at the end of 2008. But digital is just in its infancy. The expansion of the industry will create breathtaking profitability opportunities for BTN.

This company continues to knock the doors down! It recently reported that its revenues surged 67% to $32.7 million—a quarterly record—and its earnings rose to $2.8 million, or 19 cents per diluted share, compared with net earnings of $0.9 million, or 7 cents per diluted share last year.

BTN is in great shape, ending the quarter with $24.1 million in cash and cash equivalents. But this is just the beginning, and we have the opportunity to get into this company on the ground floor.

So be sure to check out the Buried Treasures portfolio for my current buy advice on BTN

Takeover Target #2
Strong Alliances With Deep Pockets

Founded in 1981, but already the eighth-largest U.S. brewer based on domestic shipments, this brewer offers craft beers to restaurants, bars and liquor stores, as well as in bottles at supermarkets, warehouse clubs, convenience stores and drug stores.

This company caught the eye of Anheuser-Busch InBev (BUD)—owner of Budweiser—which now owns 36% of the company and is its distributor. That has paid big dividends and allowed it to expand rapidly, which it continues to do. For the past three years, the company has grown its revenue an average of 50% annually and net income by 35% a year.

I think the company is too good to pass up because:

  • It operates in a rapidly growing industry.

  • It is making money and stands to make much more in the recovery.
    Insider ownership is strong.

  • A good portion of its stock is owned by Anheuser-Busch, and a complete takeover would not surprise me at some point in time, which would most likely offer us a very good premium on our shares.

Discounted valuation makes now the time to buy.

I'm going to keep my buy limits tight on this one, as it does not have a great degree of liquidity, so be sure to check out the Buried Treasures portfolio for my current buy advice on this pick.

Takeover Target #3:
Lionbridge Technologies

We've all heard these buzzwords a lot: globalization, global economy and global recession. That's because in recent years, our world has become highly interconnected.

In fact, according to the United Nations, the 30,000 multinational corporations doing business around the world in 1990 has more than doubled to around 63,000. Together, these corporations sell more than $11 trillion in goods and services annually, employ more than 90 million people and account for 70% of the world's trade.

Given these large numbers, there are certainly many challenges. And probably the biggest hurdle for most multinational corporations is conducting business in a foreign language.

As globalization rapidly expands, there is a growing sector of companies that make their living by helping businesses train their employees to translate their products and services in order to communicate more effectively in various languages.

And there is one company grabbing the lion's share of the profits and leading that field.

Lionbridge Technologies (NASDAQ: LIOX) provides language, development and testing services to businesses all over the world. It has operations in North America, Latin America, Europe and Asia. And its customers generate more than half of their revenue from outside of the U.S.—globalization at its best!

Already, the 10 largest software companies and the five largest Internet portals in the world use LIOX to help them internationalize their products and services. Its customers include Expedia, Merck, Motorola, Porsche, Nokia, Oracle, Sony Ericsson and IBM.

This strong customer base helped the company weather the recession, as its top 10 customers expanded their business by more than 8% in the fourth quarter over the third quarter. This helped the company generate $11.7 million in cash flow and improve its gross profit to 33.5%, and revenues grow 7% quarter over quarter.

That's definitely a great sign, especially since technology spending is taking flight, and globalization of industry is in a rapid phase of expansion. All of which will add nicely to the company's bottom line.

Be sure to check out the Buried Treasures portfolio for my current buy advice on LIOX.

Don’t miss out on these three phenomenal takeover targets. Grab these stocks now before they become headline news—and their shares soar.

Wait!I Have 2 More Potential Takeover Targets

But wait! How about 2 more opportunities to cash in on the M&A heat wave with these companies currently in our Buried Treasure portfolio:

Takeover Target #4:
Diversified Leader at Bargain-Basement Prices

This company is the third-largest temporary healthcare staffing company in the U.S. Its services include travel nurse staffing, travel allied health professional staffing and per diem nurse staffing, primarily to acute care hospitals, teaching institutions and trauma centers.

The company has more than 5,000 contracts with hospitals and healthcare facilities, pharmaceutical and biotechnology customers, and other healthcare organizations. It provides other healthcare specialists such as operating room technicians, rehabilitation therapists, radiology technicians and respiratory therapists to acute care hospitals, skilled nursing facilities, nursing homes, sports medicine clinics and schools.

One of the reasons for buying this healthcare staffing company is that their customer bases are varied, which gives the company vast exposure to the staffing markets.

I believe this company is in the sweet spot in the healthcare staffing industry.
So check out the Buried Treasures portfolio for my current buy advice on this hot pick.

Takeover Target #5:
International Distributor

This international distributor has been providing engineering solutions and electronic components to leading manufacturers since 1947.

Basically, the company manufactures, as well as modifies, products that are produced by independent companies, to their own specific modifications so that they can be customized for its customers and sold under the company’s private brands. These products include radio frequency (RF) and microwave components, power semiconductors, electron tubes, microwave generators and data display monitors.

Why I like this international distributor

  • The largest portion of its business—RF, wireless and power divisions—will grow like gang busters as the recovery picks up speed.

  • Its global reach includes worldwide suppliers as well as global distribution agreements.
    The company is making money, reducing debt and increasing cash, positioning it for the recovery.
Although not undiscovered by institutions, buying by the big guys is picking up, giving us the opportunity to pick up shares that will appreciate with their momentum.

Thursday, October 28, 2010

11 Market Predictions for 2011

Start preparing yourself for the bumpy ride in the year ahead

By Michael Shulman

I’d love to be the one to tell you that 2011 with be the year the economy recovers, unemployment declines and the bulls drive up the market. But it wouldn’t do me much good to lie to you, now would it?

While everyone wants to believe that things are on the mend, sticking your head in the sand and hoping for the best is no way to make money. In fact, it’s a great way to lose money. So start preparing yourself for the bumpy ride in the year ahead with these market predictions and trading ideas.

Unfortunately, 2011 will not be the year the housing market recovers. Instead it will remain in a state of depression . New home starts will not exceed 425,000, the peak being 1.6 million in 2006. Inventory will hit an all-time high. Home prices will continue to fall nationally. Foreclosures will slow in the beginning of the year, but pick up speed in the second half, delaying the housing recovery until late 2013 or early 2014.

Trade: Short the homebuilders and their suppliers.

Revised numbers will show GDP growth was less than 2% in 2009, and less than 1% in 2010. Without a housing recovery, there will be no economic recovery, as 40% of all new jobs created in 2002-2007 were related to the housing sector.

Trade: Short consumer discretionary stocks, especially luxury retailers, or this retail ETF.

Currently at 9.6%, the official government unemployment number will climb north of 10%. Real-world unemployment, which includes those who have fallen off the rolls, those too discouraged to look for work, and those working part time who want to be working full time, is closer 20%, and will climb another 2-3 points in 2011.

Trade: Go long discount retailers and short payroll service providers like Paychex, Inc. (NASDAQ: PAYX).

The Fed will rely on quantitative easing and ultra-low interest rates to buoy the economy. Bully for them — and for traders. But the Fed’s quantitative easing efforts will slow down mid-year unless there is a full-blown European banking crisis (more on that in a minute), and the market will fall when the pump stops being primed with cash.

Trade: Go long gold and silver, preferably with call options on gold and silver ETFs SPDR Gold Trust (NYSE: GLD) and iShares Silver Trust (NYSE:SLV ).

Another more serious European debt crisis will come to light. I’d say there is a 50% chance of a full-blown financial crisis and a restructuring of Irish or Greek debt.

The Irish will need to borrow money in mid-2011. The European Central Bank (ECB) will continue to be pressured to stop buying Irish and Greek debt (and if not the ECB, who is there to foot the bill?). And when a German takes over the ECB in July, frugality will be taken to a whole new level.

Trade: The euro will fall, as will the pound, so short these currencies, as well as large European Banks.

The U.S. dollar will rebound as other currencies fall. While the greenback’s decline has been steep due to expectations of the Fed printing more money, the second leg of the European debt crisis will knock the euro down, which, in turn, will push the dollar up.

Trade: Go long the U.S. dollar via the PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP).

There is gridlock in Washington after the Republicans take the House in the midterm elections. If they stay true to form, they will refuse to put through any initiatives that stand a chance of passing the Senate or being signed by the president. Their main goal will be to secure the presidential race in 2012.

Trade: Short the sectors that will suffer most from political gridlock.

States and municipalities will accelerate cutbacks and layoffs. The probability of a municipal default somewhere in the United States is about 99%. The probability of a large (population 250,000 or more) city defaulting is about 50% in 2011, and a near certainty in 2012. Cities can go bankrupt and clean out old contracts and obligations; states cannot.

I agree with analyst Meredith Whitney that at least 500,000 to 1 million public workers will get the ax. This will lead to cries for more assistance from Washington, which will not be forthcoming until the election is in full swing in 2012.

Trade: There is no real trade here.

The Chinese don’t get it. They have destroyed industries around the world. They enabled North Korea to develop and then export nuclear weapons and know-how to Pakistan and Iran, and then said, “We are your friends, help us, we cannot afford to revalue or cut back on exports.”

The developed world will hit a political tipping point and the trade barriers currently being erected out of sight will become more visible. China will do a small revaluation that will have no impact, and then things will get nasty as the year ends and the presidential primaries draw closer.

Trade: Short China ETFs and companies deriving more than 10% of their profits from Chinese operations.

All of the problems I have just discussed will lead to further economic hardships, which means depressed demand for many products and services provided by corporate America. As growth stalls (in fact, it already has for most companies), profits will fall. As corporate profits fall and quantitative easing slows, the market will drop, probably sometime in Q1. The higher the market is at this point in time, the sharper and faster the decline.

A manageable decline and continued QE through mid-year brings the S&P 500 down to 925-985. A sharp decline, and an unexpected pullback in Fed easing or a major financial crisis, brings the S&P down to 725-785. A financial panic brought on by a European bank crash brings the market down to 585 to 615 for a very brief period, and then back to around 725.

Trade: Hedge all long positions with a macro put option position on the market, such as SPDR S&P 500 (NYSE:SPY) puts. Once the mood turns sour and the market heads south, trade double inverse ETFs, and if you can stomach the risk, buy calls on them.

That’s right, the New York Giants will go all the way this year. And this time, I find the cash to go, which, of course, means they will lose.

3 Hidden Takeover Targets to Double Your Money – They’re dirt-cheap, yet they’re growing at rates that leave their bigger peers in the dust. And any hint of buyer interest will send shares soaring. Join me in the next edition as i bring you information about these 3 hidden money makers you cant afford to miss.

Thursday, January 14, 2010

5 Sectors to Avoid in 2010

Michael Shulman, January 8, 2010
Despite what Wall Street wants to believe, the economy and the markets are not even close to being out of the woods yet. In fact, the odds strongly favor a double-dip recession. Now, I know that's not what anyone wants to hear, but wishing and hoping won't get us out of this mess -- or make you any money.

There are a number of sectors that are getting talked up right now that are downright dangerous for investors to have their money in. And while the party may last a little longer, if you're long any of these sectors in 2010, there's a good chance you're going to regret it.
What should you do? Well, you have two options. You can avoid these sectors, which is smart, or if you have a penchant for making money, you can profit from them. How? I'll give you the best ETF to trade in each sector.

#1 Emerging/Developing Markets
In the past, Wall Street has lumped China in with Brazil, Russia and India calling them the BRIC countries. But this is no longer a viable way to look at these markets -- they all stand alone.
Simplistic momentum investing has taken hold in emerging market ETFs that cover regions such as Latin America or countries like Poland. Yes, Poland has its own ETF, the Market Vectors Poland (PLND). But there is too much money riding too much momentum in markets that are too small with too few equities and too little profit opportunities compared to the downside risk.
Even though the hottest money is still pouring into some truly exotic markets, Eastern Europe is a sucker's play in 2010. Your broker may call to tell you about ancient cultures, robust cities, etc., but the banking and financial systems of many Eastern European countries are in terrible shape and, more than likely, this will drag their economies down in 2010.
Trade: Buy put options on the SPDR S&P Emerging Europe (GUR).

#2 The Homebuilders
Many analysts say housing has bottomed and are touting the homebuilders in 2010. However, roughly 50%-60% of demand for homes is gone, more than 800,000 foreclosed homes have yet to hit the market with another 1.4 million or more on the way, and no one can get a jumbo mortgage.
Here's what I see happening: The homebuyer tax credit will be allowed to expire in April, there will be no more cash rebates to the homebuilders, and unemployment will continue to stifle demand.

#3 The Financials
The big banks are broke. The technical term is insolvent because they have cash and are paying bills, but their liabilities far outweigh their assets. These assets are being written down slowly -- and that includes many homeowners with prime mortgages now in trouble because of unemployment.
While this problem is common to the larger banks, the smaller banks are also being hit with souring commercial real estate loans. And there will no more bailouts for the bonus crybabies.
Trade: Buy puts on the double-inverse Financial Select Sector SPDR (XLF).

#4 China
I admit, I'm a China bear, and not the panda kind. I lived in Japan at the peak of its bubble, and it all feels the same to me. Where others see growth, I see fraudulent data -- it is not anywhere near the 10% the Chinese government boasts, according to the International Energy Agency.
Chinese state banks are fueling an unsustainable boom similar to Japan in the 1980s, with money going into unneeded factories, as well as equity markets. And it's going to burst, probably in 2010, and, if not, then definitely in 2011. If you invest in Chinese ETFs to take advantage of the bubble, use tight sell stops. But if you want to be prepared for the great China crash, your best bet is to short the ETF that best mirrors the domestic Chinese economy and equity markets …
Trade: Buy puts on the PowerShares Golden Dragon Halter USX China Portfolio ETF (PGJ).

#5 Retail
American consumers have lost one-third their wealth, and almost 1-in-5 is out of work, discouraged from looking for a job or working part time. Consumer credit lines are shrinking, and the Great American Piggy Bank -- the home equity line -- disappeared in the Lehman bankruptcy. Not a great scenario for consumer spending on anything other than necessary items.
So stay away from the famous brands with broken businesses and companies selling what I call adult toys (be good, this is a family publication) such as boats, motorcycles, jewels, $60 steaks and luxury travel.
Trade: But puts on the SPDR S&P Retail (XRT).