The Two Smartest Ways to Play the Coming Takeover Boom (Part 1)

Submitted by Wall St. Daily as part of our contributors program

Forget shopping for the latest holiday gift item. Let’s go shopping for an entire company!

Based on the latest survey of 1,000 merger and acquisition (M&A) professionals, that’s apparently the mindset in boardrooms across the country.

“We’ve seen a shift in the marketplace,” says Dan Tiemann, KPMG’s Transactions and Restructuring Lead for the Americas.

I’ll say!

Nearly 75% of the C-level executives polled by KPMG expect to complete an acquisition in 2014. That’s up from about 50% in last year’s survey.

Forget trying to offload deadweight to survive the economic downturn. Clearly, companies now want to thrive by purchasing growth.

The profound change in sentiment underscores a tremendous investment opportunity. There’s a way for the most aggressive and conservative investors to play it, too. Here’s how…

Bring on the Deals and Hefty Profits

As investors, we know that nothing – and I mean nothing – jolts a stock higher than an unsolicited takeover offer.

Just ask shareholders of Rochester Medical Corporation (ROCM), which was an active WSD Insider recommendation.

Back in August, the stock rocketed 52% higher on news of a $20-per-share takeover offer from C. R. Bard, Inc. (BCR).

Anyone here going to complain about a single-day return of 50% (or more)? I didn’t think so.

It’s also worth noting that Rochester Medical is one of three takeover deals recently announced among the companies in our WSD Insider portfolios. So we’re witnessing a legitimate resurgence.

That means it’s high time to identify even more companies that would make for attractive acquisitions.

Of course, by no means am I suggesting that this is an easy task. But it’s not impossible. Especially since M&A insiders have tipped their hands, so to speak.

More specifically, insiders singled out the two sectors they expect to have the most M&A activity in 2014: technology (44%) and healthcare (41%). Since they’re the ones who will be negotiating the deals, they’re not blindly guessing, either.

We’d be well served, then, to find companies with compelling products and technologies, trading at lower levels, with minimal to no debt. We should be on the lookout for small caps, too, as they traditionally fetch the highest takeover premiums.

Two such candidates in the technology sector, which I’ve previously singled out, are Fusion-io, Inc. (FIO) and Crossroads Systems, Inc. (CRDS).

As for the healthcare space, BioScrip Inc. (BIOS) represents a timely opportunity. Especially in the wake of CVS’ (CVS) $2.1-billion deal for the Coram division of Apria Healthcare, a peer of BioScrip.

No doubt, with a little elbow grease, we can turn up other suitable and compelling options. In fact, we’ve just uncovered a new opportunity that we’re revealing to WSD Insider subscribers this week. If you haven’t upgraded your subscription to insider status yet, go here now.

Of course, many investors believe there’s just too much guesswork involved – or too much time required – to sleuth out companies with irresistible takeover appeal like we do. Fair enough. Everyone’s entitled to his or her opinion (or to be lazy).

If you fall into that category, I have good news for you. There’s an easy and safe way that you can still tap into the dozens of deals I expect next year. Stay tuned tomorrow to find out how.

Ahead of the tape,

Louis Basenese

The post The Two Smartest Ways to Play the Coming Takeover Boom (Part 1) appeared first on Wall Street Daily.