Think you can guess which companies are prime targets for takeovers? We developed a methodology to find out, and we narrowed it down to a list of nine with bulls-eyes on their proverbial backs.

Before compiling this list, we created a list of rumored takeover candidates promoted by publications like Barron's, Wall Street Journal, Marketwatch, TheStreet.com, and StreetInsider. The complete universe can be accessed here.

Since at this stage it's all just speculation, how can you tell which takeover rumors are being taken seriously? To answer the question, we looked at what the smart money is thinking: we collected data on institutional money flows associated with our list of takeover targets. 

After crunching the numbers, the following companies showed up. Here is a list of rumored takeover targets that have seen significant institutional inflows over the past three months. Data sourced from Reuters.com.

Company

Institutional Ownership Today (# of shares)

Institutional Ownership 3 Months Ago (# of shares)

3-Month Change

Source of Rumor

Fortinet (Nasdaq: FTNT)

40,379,750

28,680,321

40.79%

Barron's

CF Industries Holdings (NYSE: CF)

64,143,127

49,379,711

29.90%

TheStreet.com

E*TRADE Financial (Nasdaq: ETFC)

146,225,790

128,278,726

13.99%

StreetInsider

Isilon Systems (Nasdaq: ISLN)

60,832,488

53,667,765

13.35%

Barron's

Sourcefire (Nasdaq: FIRE)

30,564,652

27,436,933

11.40%

Barron's

Quantum (NYSE: QTM)

211,384,783

190,675,189

10.86%

Barron's

SuccessFactors (Nasdaq: SFSF)

79,100,006

71,546,419

10.56%

StreetInsider

BJ's Wholesale Club (NYSE: BJ)

60,155,940

55,756,191

7.89%

StreetInsider

Build-A-Bear Workshop (NYSE: BBW)

12,282,235

11,539,465

6.44%

Wall Street Journal

Interactive Chart: Press "play" to visualize monthly returns and analyst ratings for all the stocks mentioned above. The full chart can be accessed here.



Remember: It's never a good idea to invest based on a hunch -- so don't consider these companies a shopping list for your portfolio. But when you consider that institutional investors have been buying up shares of these companies, this a pretty good starting point ...

Kapitall's Eben Esterhuizen, CFA, does not own shares of any companies mentioned.

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