Stockpickr: The Top Takeover Target Stocks

Some of the trades that have triggered for the month of February include InterDigital Communications(IDCC Quote), Swift Transportation(SWFT Quote) and Unit(UNT Quote). When you're looking down the list of potential takeover targets, it helps to see the other mutual funds and hedge funds that own the stocks. They also probably figure the companies are likely targets to get acquired.

For instance, oil driller Unit trades at just 3.6 times cash flows, with all analysts expecting cash flows to improve over the coming year. The company has a market cap of $2.2 billion and a net debt of $145 million, but cash flows over the past 12 months of $656 million. In addition, analysts expect the company to improve revenue from $1.17 billion in 2006 to $1.26 billion in 2007, and improve earnings per share from $6.78 to $6.89. In other words, analysts expect cash flows to remain fairly stable for Unit. How have analyst predictions fared in the past? For the past four quarters, the company has either met or exceeded expectations.

I also like that the Royce Value Fund owns Unit. Royce is up an amazing 21% per year over the past five years, as opposed to an annualized 6%. They've done this by consistently picking stocks with a high margin of safety, like I believe Unit has.

For more stocks in the Takeover Targets System, check out and bookmark the system page here.

For more trades mentioned in our System Trades of the Day portfolio, please click here.

For information on the 3x2 System or the Mega-Gap System, click on their respective portfolio pages in the Active Trader section of Stockpickr.

Stockpickr tip of the day: Every weekend I've been sending Jim Cramer the portfolios entered into Stockpickr that I think have the highest quality analysis. I will also start featuring these portfolios in regular articles, beginning next week. If you'd like me to take a look at your portfolio, please send me a note with the name of the portfolio and I'll take a look.

Also, check back on Stockpickr every Sunday for our Barron's Roundup article, summarizing the portfolios and stocks mentioned in this week's Barron's. For a look at last week's article, click here.