Value Stock-Picking, Week 4: How to Find the Next Big Value Play

Step 4. Read the news about each bank by searching for articles and videos on TheStreet.com and other sources. What you're looking for are reasons why one bank might want to be taken over and why another bank might be on the hunt for an acquisition.

For the potential acquiring bank, the deal has to "fit" their business model. For example, perhaps Banco Santander (STD) is interested in reaching the Hispanic market in the United States. Or Bank of Nova Scotia (BNS) might want to expand its market into a nearby geographic area, such as New England. Which U.S. bank would be the best fit for one of those scenarios? Take notes in the "Reason for picking" box for each stock.

Step 5. Identify one likely bank buyout and determine the most reasonable takeover price, Make sure to include the pricing method you used. Then identify one likely acquiring bank, by creating a "pick list" of the banks that present the best acquisition opportunity, given the bank's business objectives.

Step 6. Follow the news for each bank for the next three weeks, adjusting your numbers and notes if you see any relevant developments. And, if you see other possible takeover targets (or buyers), add them to your portfolio and repeat the analyses in Steps 3 and 4.

Whether you're a corporate M&A player or an individual investor, the search for value is more or less the same. As we have seen in this four-week program, when it comes to value investing, what you look for is the right combination of income, growth, margin of safety and long-term outlook.

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