There's going to be plenty of pairing up in 2010, and I went over four prime buyout candidates last week. I also explained the reasons for the hookups to continue.
- A recovering economy will smoke out buyers figuring that sticker prices on acquisition targets will only get higher.
- The recession forced companies to shave their operating costs, but now that margins have been maxed out on that front, there is a pressing need to grow in non-organic ways.
- Some of the country's largest companies are flush with cash while rock-bottom interest rates are providing measly returns on parked greenbacks. That money will be deployed to snap up smaller speedsters and disruptors.
Obviously, there will be more than four beefy acquisitions this year, so I figured I would come back with a few more names that would look fetching in a larger company's trophy case.
There aren't too many disruptors in the supermarket, but one of them is Smart Balance. The company's signature buttery spread has entrenched itself in the dairy aisle. Despite commanding a hearty pricing premium over less heart-healthy options, Smart Balance has gained market share in the spreads category for 31 consecutive quarters. That would be impressive in any climate, but it's quite the feat when you consider how so many other name brands took a hit during the recession as consumers opted for cheaper store labels.
The streak is vulnerable, but even if it does in fact end at 31, there's a lot going for Smart Balance as it aims to expand its brand into everything from peanut butter to cooking oils. It hasn't had a whole lot of success outside of the spreads category, but recent forays into sour cream and this year's national milk rollout are promising and led to a recent Motley Fool Rule Breakers newsletter service recommendation.
Milk can be another big winner for Smart Balance, especially because it's more of a weekly purchase than the monthly restocking of buttery spreads. Smart Balance is targeting sales to roughly double over the next three years, and there are many slower-moving food giants that would love to pocket that growth and valuable heart-healthy brand.
As a satisfied smoothie-slurping customer -- and a dissatisfied shareholder -- I've wondered why no one has stepped up to acquire Jamba Juice. With 742 mostly company-owned stores around the country, it has become the brand that matters when it comes to fruit smoothies.
This has been a seasonal business. No one wants to order cool smoothies when it's cold outside. However, last year's rollout of oatmeal -- and yesterday's announcement of a hot beverage rollout, consisting mostly of teas, in March -- should smooth out the seasonality.
Jamba surprised analysts with a better than expected profit in its latest quarter, and it projects a return to positive same-store sales in 2010. It would be an ideal time to make a move on Jamba.
Research In Motion
There aren't too many companies that can buy a company with a $35 billion market cap, but let's just say that the line may very well begin and end with Microsoft
Microsoft isn't stupid. With the iPhone popularity and this month's Nexus One introduction, it realizes that its two biggest foes are making big bets in smartphones. Microsoft's play to this point has been strictly from a mobile operating system perspective, but it's going to need to hop in for the entire ecosystem experience if it wants to keep up with the Jobses.
Research In Motion is trading at a ridiculously cheap 15 times this fiscal year's earnings -- and a mere 13 times estimates for the new fiscal year that begins in March. It's growing considerably faster than that.
If Research In Motion is too expensive, Palm is another logical smartphone target. Microsoft or perhaps even Dell
Shares of Palm were on fire through the earlier part of 2009, as hype for the webOS-powered Pre swelled. Now that Palm hasn't slowed the iPhone or BlackBerry success -- and Android-peppered smartphones are multiplying like rabbits -- Palm and its stock are feeling vulnerable.
Palm has surrendered a third of its stock price from its highs in September, making this a welcome entry point for Dell, Microsoft, or any corporate giant that considered paying a premium price last fall for the pioneering phonemaker.
Smart Balance is a Motley Fool Rule Breakers pick and Starbucks is a Stock Advisor recommendation. Motley Fool Options has recommended a diagonal call strategy on Microsoft, which is an Inside Value selection. Try any of our Foolish newsletters today, free for 30 days.
Longtime Fool contributor Rick Munarriz is not on anyone's list of likely buyouts this year. He does not own shares in any of the stocks in this article, except for Jamba Juice. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.