Waking up to the news that a stock you are holding is being acquired is one of an investor’s greatest dreams…
That being said, trying to find stocks who are about to be taken over is like a modern day treasure hunt.
Hunting for these potential takeover stocks can be risky, especially when rumors turn out to be wrong. The sell-off can be catastrophic, which is why I am going to share 3 stocks that could be taken over, but also make good investments even if the rumors turn out to be false.
Let’s take a look at these 3 potential takeover targets…
Alexion Pharmaceuticals (ALXN)
There is so much smoke with this company it is bananas.
For starters, it has been rumored to be acquired now by no less than 4 different other pharmas.
In 2017, Elliott Management took a stake in the company, and forcing sales is part of their modus operandi.
A large trade recently listed them as a potential takeover target for BioMarin Pharmaceutical.
And they are considered the perfect sized company with earnings growth as the stock continues to trade sideways at under 11x 2020 EPS estimates.
New York Community Bancorp
New York Community Bancorp scored higher than any other bank on Bank of America’s buyout target scorecard.
Analyst Ebrahim Poonawala says NYCB stock is an attractive hedge for bank investors in an uncertain economic backdrop.
The bank derives roughly 90% of its revenue from spread income, which should be consistent in a steady interest rate environment. New York Community Bancorp also pays a generous 6.7% dividend, which Poonawala says is safe given the bank’s opportunity for long-term earnings growth.
Bank of America has a “buy” rating and $13 price target for NYCB stock.
Another asset management company I think could be a takeover target is Liontrust (LSE: LIO), which runs a range of specialist investment funds and also has a focus on sustainable investing. It had just under £13bn in assets under management at 31 March.
While many other asset management companies have been struggling recently, Liontrust has been thriving. For example, for the year to 31 March, the group enjoyed record net inflows of £1.8bn, which boosted its assets under management by 21%. This is a particularly strong performance given the UK asset management industry as a whole experienced negative retail fund flows in six out of the seven months to the end of February.
Liontrust shares currently trade on an attractive P/E of just 13.2 which I think could increase the group’s takeover appeal. There’s also a healthy yield of around 4% on offer right now. Overall, I see considerable investment appeal in this small-cap champion.