3 Watchlist Stocks

This article is part of our Rising Star Portfolios series.

In my Special Situations portfolio, I focus on transaction-driven investments. In the past week or so, we've seen quite a few interesting developments in the special-situations arena. Here are three stocks I'm keeping my eyes on.

Diamond Foods (Nasdaq: DMND  )
This snack maker has agreed to buy Pringles, the world's largest potato crisp brand, from Procter & Gamble (NYSE: PG  ) for $2.35 billion. The purchase will more than triple Diamond's size while increasing its geographic diversity. As Fool Matt Koppenheffer suggests, the deal looks like an even trade for both parties.

Personally, I'm interested in the transaction mechanics. Diamond will fund the acquisition with $1.5 billion in its stock, which P&G will distribute to its electing shareholders in exchange for P&G shares. That stock will comprise some 57% of the new Diamond. With such a large portion of the shares changing hands, there's some possibility of forced selling. Add Diamond Foods to your Watchlist by clicking here.

Expedia (Nasdaq: EXPE  )
Last week, Expedia announced that it would spin off its TripAdvisor media unit. This advertising-driven business has some 50 million unique monthly visitors. Last year, the unit comprised 15% of Expedia's sales, but 35% of its operating income. Even more attractively, TripAdvisor posted 38% sales growth last year, compared to just 13% for Expedia as a whole. The transaction should take place in the third quarter.

It's unclear what the exact motivation for the spinoff is, although at least one analyst has suggested that Liberty Interactive (Nasdaq: LINTA  ) , which owns 17.6% of Expedia, may want more exposure to one asset or the other. While details were few, the stock ran up 13% on the news. Add Expedia to your Watchlist by clicking here.

Genzyme contingent value rights (Nasdaq: GCVRZ  )
Last week, sanofi-aventis (NYSE: SNY  ) announced that it had successfully taken control of Genzyme (Nasdaq: GENZ  ) . As part of that transaction, Genzyme shareholders received a contingent value right for each share they owned. The CVRs receive milestone payments based on the performance of several drugs, mostly Lemtrada, which has yet to win U.S. approval. The total payout could come to $14 per share, although several analysts appraise the price at $4 to $6 per stub. The CVR last closed at $2.32.

Interested in any of these transactions? Have another stock to share? Join me on my discussion board and follow me on Twitter (@TMFRoyal).

This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our Rising Star analysts (and their portfolios) here.

Jim Royal, Ph.D., owns shares in Procter & Gamble. Procter & Gamble is a Motley Fool Income Investor pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On April 13, 2011, at 7:39 PM, caballote77 wrote:

    excellent article Jim!

    These are the companies / situations I LOVE.

    GCVRZ looks like a great opportunity. I will now begin my own due diligence.

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