With brand name quality retailers selling at multi-year lows and, at distressed valuations, we think retail M&A is primed for a boom.
At BillionairesPortfolio.com, we've identified potential takeover candidates in retail by looking at the most distressed stocks where there is a presence of a big influential shareholder. Many times a shareholder with a controlling stake in an undervalued company and a history of activism will become the catalyst for a sale of the company.
Using these criteria, we have found a list of seven retail stocks that either: 1) have the potential to be acquired for a big premium, or 2) present a rich turnaround opportunity. Each are heavily owned by a top hedge fund, private equity firm or billionaire investor.
1) Wet Seal (WTSL) -- Wet Seal stock has huge upside potential with very limited downside risk. The company has 65 cents in cash per share and sells for just 90 cents. That means the company has almost as much cash on its balance sheet as it entire market capitalization. In addition, it's owned by activist billion dollar hedge fund, the Clinton Group. This investor has recently stated in writing that if Wet Seal gets cheap enough, they would have no problem buying the company outright at a significant premium.
2) Aeropostale (ARO - Get Report) -- Billionaire private equity-hedge fund Sycamore Partners, the one who just recently announced their intention to buy Express, owns more than 12% of Aeropostale through stock and warrants. Furthermore, Sycamore just loaned Aeropostale $150 million in cash. They have a history of acquiring companies at a huge premium after making an initial investment, such as Talbots and Hot Topic.
3) Destination XL Group (DXLG) -- Private equity-hedge fund firm Red Mountain Capital Partners owns a whopping 15% of Destination XL Group. The fund has been adding to its position over the past month.