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 wound-care products specialist Kinetic Concepts
So what: Citing people close to the matter, Bloomberg reported that Kinetic is negotiating a sale with a group of private equity firms for a deal possibly valued at more than $5 billion -- or a greater than 16% premium to yesterday's closing price. Kinetic shares are hitting new 52-week highs on the news with extraordinarily high volume, so it's obvious that Mr. Market thinks the odds of a deal going down are pretty good.
Now what: Kinetic may be one takeover target worth taking a chance on. Even with today's double-digit pop and big run-up over the past year, the stock still trades at a cheapish forward P/E of 12. Fools know never to buy a stock based on buyout buzz alone, but Kinetic's strong cash flow generation, global growth prospects, and, most importantly, reasonable valuation might provide enough downside protection to make the bet a safe one.
Interested in more info on Kinetic? Add it to your watchlist.