Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of specialty retailer Charming Shoppes (Nasdaq: CHRS) jumped more than 10% today on no apparent news.
So What: It's been a day of buyout excitement with OfficeMax (NYSE: OMX) shares surging after a JPMorgan Chase analyst suggested that it and fellow office retailer Office Depot (NYSE: ODP) could be good buyout targets. And it's not that crazy of an idea -- yesterday Gymboree (Nasdaq: GYMB) agreed to be taken out by Bain Capital, while strategic buyers like L'Oreal and Procter & Gamble (NYSE: PG) are supposedly sniffing around Avon Products (NYSE: AVP). It's very possible that investors have been jumping on Charming Shoppes shares on the hopes that they could end up in the sights of a financial or strategic buyer.
Now What: Could a Charming Shoppes buyout happen? Well sure, in theory it could. But speculating on takeovers that aren't even at the rumor stage is a terrible idea. The company's income statement hasn't looked particularly good lately as consumers have been pinched by the recession, but it does have a net cash position on its balance sheet and continues to produce solid free cash flow. For investors that have Charming Shoppes on their radar, the best bet is to focus on the company's underlying business and financial performance and not worry about pie-in-the-sky buyout hopes.
Interested in more info on Charming Shoppes? Add it to your watchlist here by clicking here.
Procter & Gamble is a Motley Fool Income Investor recommendation. The Fool owns shares of and has written covered calls on Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.
Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy assures you no Wookiees were harmed in the making of this article.
