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:
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:
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.