Mergers and acquisitions (M&A) declined in 2019. That is, because business leaders around the world have been uncertain about where the economy will go, they have not aggressively looked at acquiring other companies in the last twelve months.
Although it is unlikely to change much in 2020, recent sales have made previous M&A opportunities both more attractive and cheaper.
Fortunately for investors, a buyout is one of the fastest ways to make money in the stock market. That is, if you own the share in company X and company X is bought out by company Y at a premium of 25%, then the company’s X share usually jumps 25% in a single day. For the latest example, see Fitbit (NYSE: FIT) or Care.com (NYSE: CRCM).
With this in mind, I have compiled a list of seven stocks that look like strong buy targets after a market rise. Will all these stocks be taken out for big premiums? No, but a handful of them could, and that only makes these stocks worth looking at this year.
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Potential passers-by: Amazon, Walmart, eBay
The e-commerce solution provider Shopify (NYSE: SHOP) has used direct and decentralized retail winds to move from emerging players in the global retail market a few years back to the backbone of many corporate e-retail today.
In this way, the company has started rubbing elbows with major retail giants such as Amazon (NASDAQ: AMZN), Walmart (NYSE: WMT) and eBay (NASDAQ: EBAY), all of which run e-commerce websites that are lost in the market. share to Shopify’s trade-centered model. This alonbe makes them one of the more convincing acquisition targets
These online retailers can either choose to compete with Shopify or acquire Shopify. I have a feeling of “acquiring” maybe what these big retailers choose, because Shopify is still not that big (market value below $ 50 billion) and has a lot of momentum (50% plus sales and volume growth).
If so, you can watch as Amazon, Walmart, eBay and others participate in a bidding war over Shopify.
Domino’s Pizza (DPZ)
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Potential passers-by: Restaurant Brands International
One of the fastest consolidating sectors in the world is the fast pizza category.
Four of the top ten pizza chains in America have been acquired in the last eight years, including Papa Murphy’s, California Pizza Kitchen, Round Table Pizza and Cici’s. After that, America’s largest pizza chain – Domino’s Pizza (NYSE: DPZ) – could become number five in 2020.
It has complained that Restaurant Brands International (NASDAQ: QSR), the parent company of Burger King and Popeye, will soon want to add another top brand to its restaurant portfolio. A brand that Restaurant Brands does not have in its portfolio is a pizza brand. Domino’s best top brand in America in terms of sales and speed. Seems like a perfect marriage, no?
As such, I would not be surprised to see Restaurant Brands make a play for Domino’s.
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Potential passers-by: Amazon, Walmart
Calendar 2019 was the year that Walmart and Target brought up to Amazon in the e-commerce game by expanding equally large digital companies with sprawling omnichannel features.
In response, Amazon tried to break into the physical retail world. But such attempts have fallen short, and Amazon’s presence in the physical retail trade is still minimal.
This means that Amazon has a relative disadvantage for Walmart and Target, both of which have a large online and offline presence. As time goes on, Amazon must increasingly establish an offline presence and one of the more attractive shopping targets in that category is TGT.
What better way to do that than by simply acquiring an offline retail giant? And what is better to buy offline retailers than Target? Target is the hottest name in retail right now, with an underlying demographic that largely matches the Amazon Prime demographic.
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Potential passers-by: Pfizer, Amgen, Novartis
In late 2018, bio-drug company Amarin (NASDAQ: AMRN) cracked the fish oil code and created a fish oil pill (called Vascepa) that actually reduces the risk of a cardiovascular event (other fish oil pills have tried very hard to do this; no one has actually done so).
In the last twelve months, sales of Vascepa have skyrocketed – and that is before FDA approval, which was just granted at the end of 2019. Now, 2020, Vascepa will be the first and only FDA approved treatment for the treatment of persistent CV risk in addition to statin therapy.
That’s a big thing. Other large pharmaceutical companies are taking notice. They have tried very hard to do what Amarin has accomplished but with little success. Given how far ahead Amarin is in the fish oil market and the huge blockbuster that its core therapy Vascepa seems to be positioned, it is likely that a large biotechnology company is making a game for Amarin to get in early on what will be huge sales and profit growth in the near future. three to five years.
The potential suitors? Maybe Pfizer (NYSE: PFE), Amgen (NASDAQ: AMGN) or Novartis (NYSE: NVS). In other words, there is no shortage of potential suitors here, and that could ultimately lead to Amarin being charged a huge premium.
Under Armor (UAA)
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Potential passers-by: Amazon, Nike, Adidas
Athletic Garment Manufacturer Under Armor (NYSE: UAA) has been an eye-opener for an otherwise glowing athletic apparel market in recent years.
Despite the company’s struggle, Under Armor is still one of the top five preferred and most well-known brands in this market along with Nike (NYSE: NKE), Adidas (OTCMKTS: ADDYY), Skechers (NYSE: SKX) and Lululemon (NASDAQ: LULU)) . Because of its struggles, UAA shares are also the cheapest in the group one mile.
Of course, that makes Under Armor an attractive acquisition target for a major retailer trying to jump into the athletic clothing game.
Who fits that bill? Amazon. They have been trying to create their own athletic clothing brand for several years now, with very little success. Nike also pulled out of the deal with Amazon, so the company has a big hole in the retail empire when it comes to athletic clothing. One way to fill that gap would be to acquire Under Armor and turn UAA into the Amazon clothing brand that the company has been trying to establish for so long.
Nike could also play for Under Armor. Just like Adidas. It is simply a result of consolidation in the athletic clothing market, as the industry’s two giants are looking at all angles to compete against each other.
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Potential compilers: Amazon, Facebook, Apple, Alphabet
Alphabet’s (NASDAQ: GOOG) major acquisition of Fitbit earlier this year – along with reports that Facebook (NASDAQ: FB) had similar Fitbit takeover talks – speaks to one of the most important recent trends in big tech: big tech companies are aggressive and fast who want to expand their smart product ecosystems, so that they increase the amount of data about consumers, which they can turn around and make money on via several channels.
Due to this trend, the consumer robot leader iRobot (NASDAQ: IRBT) can pick up a bid from a major technology giant by 2020. iRobot makes unique smart home products, such as robot vacuum cleaners, pool cleaners and lawn mowers.
Each of these products collects huge data regarding the design of a consumer’s home. No large technology company has any exposure in this consumer robot market, nor do they have insight into the information that iRobot collects.
Consequently, big tech will inevitably want a piece of the consumer robot cake. iRobot is the best game in town in this space. Putting two and two together, then iRobot was able to pick up a significant bid from a major technical suitor 2020 like Apple (NASDAQ: AAPL), much like Fitbit did in 2019 from Google.
Rite Aid (RAD)
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Potential passers-by: Amazon, Walgreens, CVS
In an interesting twist in the story Rite Aid (NYSE: RAD), the companies that drove this specialized retailer to the point of extinction in the 2010s were able to save the company in the 2020s.
While Amazon, Walgreens (NASDAQ: WBA) and CVS (NYSE: CVS) created tremendous competitive pressure that made Rite Aid largely irrelevant last decade, the same company could actually try to acquire Rite Aid as the specialty store world consolidated by 2020.
The writing seems to be on the wall here. Amazon wants a physical retail presence. They also want to enter the pharmacy industry. Buying Rite Aid allows them to do both of these things at a very cheap price. Sure, they have to rebuild and reorganize some stores, but that’s a very feasible task for a $ 900 billion company.
As such, it seems that Amazon is positioned to soon place a bid on Rite Aid. They will not be the only suitor. Both Walgreens and CVS compete directly with Amazon and would do anything to keep Amazon out of the physical pharmacy game. It includes Amazon bidding on Rite Aid.
The result? You could have a big bidding war for Rite Aid.
At the time of writing, Luke Lango was long WMT, SHOP, NKE, UAA, SKC, LULU, FB, AAPL and CVS.