Keep an Eye on These Three Buyout Targets

Palm Beach Daily

Keep an Eye on These Three Buyout Targets

By William Mikula, analyst, Palm Beach Daily

You may be familiar with the iconic film, Wall Street. It’s one of my favorite movies.

And it has an infamous line: “Blue Horseshoe loves Anacott Steel.”

In the film, corporate raider Gordon Gekko—played by Michael Douglas—wanted to leak word of a company he had in his crosshairs as a potential buyout candidate.

Blue Horseshoe was Gekko’s code name… and Anacott Steel was his target.

Within minutes of the leak, the company started trading higher as investors snapped up shares. Gekko made a fortune virtually overnight.

Now, if you’ve seen the movie, you know how it ends: Gekko ultimately gets busted for insider trading.

But today, I’ll share a strategy for ordinary investors to cash in on these types of corporate buyouts—legally. (And I’ll even reveal three buyout candidates on my radar.)

Be Your Own Hedge Fund

For decades, Wall Street has used merger and acquisition (M&A) announcements to rake in billions in profits. But you don’t need to be a rich insider like Gekko to take advantage of these opportunities.

You see, merger arbitrage is a simple—yet highly profitable—strategy to profit from M&A activity.

Basically, hedge funds will target a company that’s received a buyout offer.

Its shares usually trade below the offer price. And hedge funds know the share price will go up by the time the deal is complete.

So they buy the company’s shares before the merger happens. That way, the funds earn the difference between the company’s trading price and the offer price.

Let me give you an example…

Say you see a book at a garage sale in Kansas for $40. And a collector at a New York bookstore is offering $50 for that same book.

You can buy the book from the garage sale for $40… sell it to the collector for $50… and pocket the $10 difference.

That’s how arbitrage works.

And there’s another way to boost gains from mergers, too: buyout targets.

Buyout Profits

Identifying ideal buyout targets is like knowing which book the New York collector wants ahead of time.

This strategy can deliver overnight gains of 20%, 30%, 50%, or even more in some cases.

For example, in July, Daily editor Teeka Tiwari and I believed two catalysts would lead to a surge in gold’s price: decreasing supply and rising prices.

To cash in, we identified the best buyout targets: solid, mid-cap gold companies with clean balance sheets and mines in North America (where mining and property rights are protected).

We published three trades in our Alpha Edge newsletter. Sure enough, as gold moved higher this summer, our trades shot up.

We’ve since closed portions of two of the trades for gains of 263% and 140%, respectively—in only 21 days. Meanwhile, gold is only up around 20% on the year. That’s a solid return, but it’s nowhere near our results.

(Alpha Edge readers can access our current list of top gold buyout candidates right here.)

The point is, taking a stake in the best buyout candidates ahead of major catalysts can position you for massive, quick gains. And the good news is…

M&A Activity Is Heating up

As you can see, merger activity remains strong and in an uptrend…

And not only are we seeing more merger activity… the returns are growing, too:

Hedge Fund Research’s Merger Arbitrage Index is up over 200% since 1998, despite two 10%-plus corrections during the 1998 and 2008 market crashes.

So we expect this activity to continue—and deliver big profits to investors who know which sectors and companies to target…

What to Look For

Right now, we believe there will be plenty of M&A opportunities during the rest of this year.

And the gold space is fertile ground for this activity. With increased market volatility, gold should move even higher. And more well-run, mid-cap miners will be scooped up as a result.

In general, Teeka and I look for companies growing sales, earnings, and free cash flow by double digits year after year.

They have plenty of cash in the bank and low debt levels… operate in profitable niches… and have dominant market positions that larger companies crave. The big boys would rather buy these companies than compete with them.

And gold isn’t the only space that’ll see an uptick in M&A activity, either.
Earlier this month, I flew to Montreal to link up with Big T for some “boots on the ground” research on a few promising companies we’ve been watching.

They’re getting a boost from a specific catalyst on October 31. As this deadline nears, market volatility will likely create some attractive buyout targets.

I can’t say too much more yet… But if everything checks out, we’ll have a few brand-new M&A trades with double- and triple-digit profit potential.

In the meantime, here are three companies with the qualities Big T and I look for in juicy buyout targets:

  • Specialty glassmaker and optical fiber producer Corning (GLW)

  • Media research firm Nielsen Holding (NLSN)

  • Computer chipmaker Micron Technology (MU)

Keep in mind, these aren’t official recommendations. They’re just solid companies that would be ideal candidates for larger competitors to gobble up—at a discount.

Invest wisely,

William Mikula
Analyst, Palm Beach Daily

P.S. Today at 1 p.m. ET, Big T and I are releasing what may be the most important investment update of the year for you

During this presentation, we’ll show you how to take advantage of the time-sensitive opportunity playing out in the market between now and October 31.

This opportunity could unlock $300 billion in profits for U.S. investors—and put you on the path to collecting thousands or tens of thousands of dollars (and perhaps even over $100,000). But you only have a few hours left to act if you wish to take part.

So instantly register your details to attend our confidential briefing and join Teeka and me today at 1 p.m. ET.

IN CASE YOU MISSED IT…

LAST CHANCE: EXPIRES IN A FEW HOURS…

WARNING: You may not have access to Teeka's 3 new trade alerts with spectacular profit potential

Today @ 1 pm ET: Former hedge fund manager Teeka Tiwari’s set to release his next three “millionaire-maker” trades in a private briefing—and he believes they may have even more spectacular profit potential than the three he shared on July 12 that skyrocketed 59%, 125% and 215% in just 11 trading days… You may only have a few hours left to get in on this…

But you must pre-register to receive these 3 trades in advance if you wish to receive them – and according to our records, your name is NOT yet on Teeka’s VIP list.

You may only have a few hours left to get in on this…

Click Here To REGISTER INSTANTLY So Make Sure You Don't Miss a Thing.


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