5 Takeover Targets to Buy Before Wall Street Finds Out

BALTIMORE (Stockpickr) -- Jumping in front of corporate buyouts can fuel lottery-like gains for your portfolio. But focus in on a couple of factors, and you can do it without the lottery-like odds.

Mergers and acquisitions, better known on Wall Street on M&A, is starting to pick up again in late 2012. The latest high-profile example is Sprint (S), whose deal with Japan's Softbank has helped to spur a 64% rally in shares this quarter. Mid-cap cell carrier is another example -- it's rallied more than 73% over that same period after announcing a takeover deal with T-Mobile. Small-cap Canadian energy stock Nexen (NXY) is up more than 50% after announcing that China's CNOOC (CEO) was acquiring it.

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M&A volumes have been struggling for much of this year, with corporate managers unable to shake the scariness of stocks that's plagued investors for most of 2012. But there are attractive deals to be found out there now, and that limits the amount of time buyers are willing to sit on their hands.

That's why M&A deals are starting to pick up again.

As I write, interest rates are near zero, corporate debt is cheaper to issue than it's ever been, and firms' cash holdings are bigger than they've ever been. That, and a stock market that's trailed fundamental growth for the past few years, make the perfect environment for buyouts to come back in favor. The trick is finding the firms with the biggest targets on their backs.

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To do that, we're focusing on acquiring firms' favorite attributes: solid balance sheets stuffed with tangible assets, consistent earnings and cash flow generation and bargain valuations. Here's a look at five stocks that could be buyout targets as M&A activity picks up in the final quarter of 2012.

 

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