Stockpickr: Top Stock Takeover Targets

Super-value mutual fund Heartland Value owns shares of InterDigital, as does hedge fund Renaissance Technologies. Renaissance is in line with my theory, as it continues to buy up companies that have a lot of cash, no debt and good cash flows. (As an aside, Heartland is one of my favorite value mutual funds to piggyback. It has returned an average of 15.7% over its 22-year history by focusing primarily on value-based micro-caps.) Other stocks owned by Heartland include Input/Output(IO Quote) and Skyworks Solutions(SWKS Quote).

Pioneer Drilling(PDC Quote) is another name on the takeover list. The company provides drilling services to oil and gas exploration companies. In other words, if you have a few million acres of land you'd like to drill to find oil or gas, you would hire Pioneer to come in and do the job. As long as people need oil, and as long as oil prices remain above $40, oil companies will be willing to spend more money to drill in places where it's harder to extract the oil.

Pioneer has a pristine balance sheet with $74 million in cash in the bank, giving it an enterprise value of just $522 million. I say "just" because the company's EBITDA (earnings before interest, taxes, depreciation, and amortization) is $176 million, meaning it trades at just three times cash flows. It has margins of 32%, and analysts expect revenue to be pretty much even next year compared with this year.