Sneak Preview: When to Never Say Never

When the stock got back to $45, Phelps Dodge(PD), another mineral company, got a very big takeover offer from Freeport-McMoRan(FCX), a gold and copper company. Alcan spiked in sympathy. Immediately, almost all of the analysts who followed the company either downgraded it or pooh-poohed the notion that it could be taken over or would be willing to be taken over. Management gave interviews in the Canadian press about how the company was not a target and had not gotten any inquiries, but it was definitively not for sale.

I read the articles and the analysts' reports, and even though I liked the fundamentals, I decided to boot the company for a small gain at $47. Less than a year later Alcan got not just one bid, from Alcoa(AA), as part of a big consolidation in the aluminum business, but a second bid, for $101, by Rio Tinto(RTP), one of the largest mineral companies in the world. Alcan happily accepted that offer, which neither it nor the analysts thought was possible when the stock was at $47.

My conclusion: never say never about a potential takeover, even when management and the analysts point-blank rule it out. If a company has stock, ultimately that company is for sale. Don't get scared away just because the Street and the company's management don't believe it can be bought.

Editor's note: This is a special sneak preview of Jim Cramer's just-released book, Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer). Look for more sneak previews every day, and get your free copy with your annual subscription to Action Alerts Plus; click here for details. Catch Cramer in person to get it signed: Wednesday, Dec. 5, at 7 p.m. EST in New York City's Union Square Barnes & Noble; Wednesday, Dec. 12, at 7 p.m. in Bridgewater, N.J.'s Borders; and Saturday, Jan. 12, at 1 p.m. in Westbury, Long Island's Costco.

Missed the first sneak previews? Read the book intro and the rules of getting and staying rich: Rule 1 and Rule 2.

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