In his book You Can Be a Stock Market Genius, author and investor Joel Greenblatt highlighted the opportunity hidden in mergers and acquisitions, spin-offs, and restructurings. Some deals are so complex that the true value of a stock won't be unlocked until well after the fact, giving savvy investors a chance to get in early and grab hold of shares at a discount. Huge profits are possible, and he achieved 50% annualized returns for a decade investing in them.
We'll look at some announcements presenting an opportunity for profit, then pair that with the views of the 180,000 members of Motley Fool CAPS to see what they think of the businesses involved. If the best and brightest in the investment community like these stocks, it may be worth your time to delve further.
But not every deal is worth your money. It takes diving into the filings to understand the nuances, so don't use the stocks below as a buy list; more due diligence is called for on your part.
CAPS Rating (out of 5)
Type of Situation
|Research in Motion (Nasdaq: RIMM )||*||Spin-off||Handset business|
|salesforce.com (NYSE: CRM )||*||Acquisition||$745 million for social-media marketing platform Buddy Media|
Again, this is just a starting point for further research. Do your homework before committing real money to these special situations.
A smart decision
Having revolutionized the handset business back when it introduced the BlackBerry, Research in Motion has long since been left in the dust by Apple (Nasdaq: AAPL ) and Samsung, which now dominate the smartphone market. Having hired two investment banks to consider its strategic options, rumors are flying that RIM's biggest option may be to shed the handset division altogether.
According to an article in The Sunday Times, RIM is considering divesting the division or spinning it off as a standalone company. Amazon.com is said to be interested, which makes complete sense to me.
Amazon has been tweaking the nose of Apple with its Kindle readers, and a smartphone to challenge the iPhone would be yet another way for the camel to get its nose under the tent of broadening tech offerings. Facebook (Nasdaq: FB ) , too, has looked to expand beyond the narrow confines of a social-network platform. A Facebook phone would be one way to do that, and it was rumored to be moving in that direction already. Having a ready-made market would be a huge leap forward.
Research in Motion would be left with its messaging platform if it moves forward with the divestiture plan, and analysts suspect the company will either open it up to rivals like Apple and Google or sell it. Obviously, five straight quarters of losses create an incentive for bold action, and one last option on the table is to sell at least a part of itself to someone like Microsoft.
CAPS member troym72 pointed to RIM as one company that "will disappear in 2013," though a sell-off was probably not what the prediction was about. Don't be surprised to see the stock get a bounce from the news, but something tangible would have to arise from the whispering for the gains to hold.
You can keep an eye on the spin-off's developments by adding RIM to your watchlist. Then let us know in the comments section below or on the Research in Motion CAPS page what company you think would make the perfect BlackBerry buyer.
Social media doesn't typically play a part in the mindshare surrounding salesforce.com, but the customer relations specialist is weaving the online movement more tightly into the fabric of its business. Its Radian6 marketing and analytics division has become an important tool in fending off and beating back advances made by Oracle (Nasdaq: ORCL ) and SAP.
By purchasing Buddy Media, a social-media marketing firm, and linking it together with Radian6 (which it bought last year), it creates a powerful medium for companies to use the cloud to market and analyze their business. SAP just agreed to buy networking and online commerce software developer Ariba for $4.3 billion. Oracle bought social-media marketer Virtue last month, following it up two weeks later with analytics analyzer Collective Intelligence. Microsoft is getting into the act, too, buying Facebook-for-business platform Yammer for $1.2 billion.
Saleforce has an edge here, however, being able to enhance its customers' understanding of their social-media campaigns across the entire networking universe. Through a partnership with Twitter, Radian6 customers will have available to them the entire catalog of public Tweets to analyze consumer responses to cloud marketing campaigns, in addition to the existing ability to examine Facebook and LinkedIn efforts.
With everyone crowding into the social-media space, however, CAPS member USALand finds paying a lofty multiple for Salesforce's stock a bit too much. Let us know in the comments section below whether you agree, and add salesforce.com to the Fool's free stock-tracking service to see whether joining in the spending spree was the right move.
Checking the mercury
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