The rumor mill on Wall Street is always churning, probably producing more fiction than fact. But that never seems to stop investors from trading on the intel.
Flush with cash, companies have been on a six-month acquisitions streak, and many investors are looking for every possible way to get in on the M&A action. Just this week, shares of chip maker AMD spiked 5% on gossip of a possible acquisition. And around tech stocks like Adobe, AOL, and Yahoo!, there's practically perpetual white noise.
But how do you know which takeover tips will actually pan out? Well, you don't. It's nearly impossible to say for sure where the chatter is coming from -- and if you can't pin down its origin, you can't determine its authenticity. You never know if your source is just spinning a tall tale, hoping to make a profit by moving in and out of merger targets.
Trading on gossip is really just throwing darts, with similar odds. A better investment strategy? Focus on companies that are already profitable -- so whether or not these takeover targets are acquired, they're likely to be solid additions to your portfolio.
For starters, check out Kapitall's list of the most profitable takeover targets. To compile this list, we started with a universe of takeover targets identified by sources like CNBC, UBS, Merrill Lynch, Barron's, Morningstar, and Street Insider. We then narrowed down the list by only focusing on those stocks that are more profitable than their competitors. (Click here to access the entire universe.)
Here is a list of the top seven most profitable takeover targets. (Click here to access free, interactive tools to analyze these ideas.)
|
Company |
Analyst / Publication That Identified Company as a Takeover Target |
Gross Margin: 5-Year Average |
Net Profit Margin: 5-Year Average |
|---|---|---|---|
|
Akamai Technologies (Nasdaq: AKAM) |
Business Insider |
73.67% vs. industry average of 43.97% |
25.92% vs. industry average of 15.85% |
|
eBay (Nasdaq: EBAY) |
Barron's |
75.9% vs. industry average of 43.97% |
18.96% vs. industry average of 15.85% |
|
ITT Educational Services (NYSE: ESI) |
John Dorfman |
59.62% vs. industry average of 55.97% |
18.97% vs. industry average of 9.05% |
|
Edwards Lifesciences (NYSE: EW) |
Street Insider |
65.79% vs. industry average of 47.42% |
11.98% vs. industry average of 6.37% |
|
Jos. A Bank Clothiers (Nasdaq: JOSB) |
Wall Street Journal |
61.92% vs. industry average of 45.1%% |
8.38% vs. industry average of 5.99% |
|
Mead Johnson Nutrition (NYSE: MJN) |
Street Insider |
63.88% vs. industry average of 31.44% |
15.91% vs. industry average of 4.99% |
|
comScore (Nasdaq: SCOR) |
Business Insider |
69.71% vs. industry average of 25.75% |
11.18% vs. industry average of 2.57% |
Profitability data and industry comps sourced from Reuters. The list has been sorted alphabetically.
Interactive Chart: Press Play to compare analyst opinion on all the stocks mentioned above.
Disclosure: Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.
