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5 Takeover Targets to Buy Before Wall Street Finds Out

Stocks in this article: ICESNAKLACTERHRL

KLA-Tencor

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It's been a pretty tepid year for KLA-Tencor (KLAC). So far in 2012, shares of the semiconductor manufacturing supplier have slid around 4%. That's significant underperformance versus the broad market. But KLAC's inability to get any love from buyers puts this $7 billion stock in the acquisition crosshairs of bigger names right now.

>>3 Tech Stocks Hedge Funds Are Buying

KLA-Tenor supplies process management systems for chipmakers. Essentially, that means that the firm's business is built around helping chipmakers improve their manufacturing lines through automation and high-level monitoring. Because KLAC's products directly reduce chipmakers' costs, the firm's revenues are less susceptible to industry headwinds than those of its customers. To date, that fact hasn't been reflected in KLAC's share price; the cyclical rut in semiconductor manufacturing is hitting this name every bit as hard in 2012.

But financially, KLAC is turning out some impressive performance. The firm's net margins are deep in the double digits, its revenues have been growing briskly for the last four straight years, and it carries a nearly $1.8 billion net cash position on its balance sheet right now. Effectively, the cash in those coffers means that a quarter of KLAC's market capitalization is risk-free right now. An acquisition could be in the cards for this firm.

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