I originally posted this video for members inside 12631, which is a premium service affiliated with The PPT, last Tuesday, January 4, 2011. Click here for more details.
In addition to what I say in the video (my notes have been copied and pasted into the body of this post below the video), the basic idea I present is to not get too caught up in buying a stock solely because it is a takeover play. You will want to be sure the price action is still in your favor, as well as a myriad of broad market factors I outline in the video. Otherwise, you are left holding a perennial takeover candidate that is “always a bridesmaid, never a bride.”
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[youtube:http://www.youtube.com/watch?v=okUnzqDDqeE 550 412]__________
ANATOMY OF A TAKEOVER PLAY
1. Where Are We in the Cycle?
–> Easy Money/Cheap Borrowing Costs For Private Equity Firms
–> Firms Have High Levels of Cash re: M&A
–> Confidence Coming Back After Bear Market to do Deals–Recall 2008
Leads to…
2. Which Sectors are Seeing the Most M&A Action?
–> Energy Sector Has Seen Deals Over the Past 18 Months
–> Technology Names are Perennial Targets/Sector Always Active
–> Financials Now Look to Be on Radar as Well (re: “The Fly”)
3. GOLDEN RULE FOR TAKEOVER PLAYS:
–> THOU SHALT OBEY THE “SISKEL TEST”–Gene Siskel (Siskel & Ebert)
—> Film Satires/Slapstick Comedies (e.g. “The Naked Gun” “Hot Shots”)
—> Would You Still Find the Joke Funny if You Had Not Seen the Film Being Spoofed?
—> Applied to Stocks: If Firm was Not Takeover Target, Would You Still Have Bought?
4. Examples: $ATHR, $BRCD, $HAIN, $NUAN
When can I get a Pay Per View option for Chessnwine vs James Altucher in a best of three chess match??
Bought some EPV.