By Bernard Condon, AP
NEW YORK -- If stock investing is like playing the lottery, your odds of winning the jackpot just got a little better.
Companies are buying each other at the fastest pace since before the Great Recession. Investors lucky enough to own stock in a company being bought are pocketing big money.
So far this year, $219 billion worth of deals have been announced, more than double the level over the same time last year, according to Dealogic. The value of deals is also slightly above the same period in 2007. And that turned into a record year, with the value of deals reaching $1.6 trillion.Those looking to profit on deals by picking companies before they're taken over should know it's not easy. But there are guidelines for choosing possible M&A targets. One is a reasonably valued stock, not so high that it's likely to scare off buyers. Other signs are low debt and a history of generating lots of cash. Those are key for buyers who borrow heavily to finance deals, says Hottovy, the Morningstar analyst. Their debt can be repaid with the money coming out of target companies. Among the picks in a Morningstar report co-authored by Hottovy last month:
(KSS): The department store chain has strong cash flow and its stock trades at 10.7 times per share earnings in the previous 12 months, which
Morningstar considers attractive. The average for
S&P 500 companies is 17 times.
(CHK): The second-biggest U.S. gas producer is a target of investors looking to get the share price up. Embattled CEO Aubrey McClendon was pushed out last month. The stock is down 12% in the past 12 months.
Morningstar likes that the Los Angeles-based bank courts wealthy business owners as customers and has increased earnings per share by 63% in two years. The stock is up 17% in the past 12 months.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts