The Next Buyout: 9 Potential Takeover Target Stocks

|
 |  Includes: AKAM, HK, HSP, IAC, MYGN, RRC, STX, T, TAP
by: Rougemont

Warren Buffet's Berkshire Hathaway Inc. agreed to buy chemical maker Lubrizol (LZ) recently. The deal was valued at about $9 billion cash or $135 per share for Lubrizol. These shares surged on the news from about $105 per share on Friday to over $134 yesterday for a gain of nearly 30%. As this deal shows, investing in stocks with reasonable valuations, strong management teams and solid business models can result in another company acquiring them outright.

With many companies holding huge amounts of cash on their balance sheets and interest rates still near record lows, it is likely that this acquisition spree will continue. With that in mind, I have researched a few names that fit the criteria discussed above and are therefore more likely to be looked at as a buyout target. Some of these names have been considered to be buyout targets by multiple sources or analysts. These are solid companies that appear undervalued and likely to rise whether or not they are acquired.

Here are some of the names worth looking at.

Akamai Technologies, Inc. (NASDAQ:AKAM) shares are trading at $37.37.These shares have arelative strength indexof about25 which indicates the shares are very oversold.AKAMis a leading Internet service company that helps accelerate and deliver website content. They reported earnings which disappointed the market and shares dropped from about $47 before earnings to current levels of around $37. The 50 day moving average is about $45.93 and the 200 day moving average is about $46.36. Earnings estimates forAKAM are just over $1.60 per share in 2011 and$1.83 for 2012.

Why Akamai could be an attractivetarget: it has a rapidly growing business and lots of cash on the balance sheet. That could appeal to a number of major tech stocks some of whom have tens of billions of $'s sitting on their balance sheets.

Molson Coors Brewing Company (NYSE:TAP) shares are trading at $44.77.Molson Coorsis abrewing companywith a diversified line of products including Coors, Blue Moon, and Keystone. The 50 day moving average is $46.80 and the 200 day moving average is $45.93. Earnings estimates forTAPareabout $3.84per share in 2011 and even more for 2012 so the PE ratio is about 11.TAP pays a dividend of $1.12 per share which is equivalent to a2.5% yield.

Why Molson could be an attractive target: these shares are trading at a discount to other brewers and beverage companies in terms of PE ratio/valuation. By comparison Anheuser-Busch (NYSE:BUD) is trading for about 17 times earnings and the dividend is lower than TAP's dividend yield. Also,TAP shares have fallen from about $50 since the beginning of this year whichmight bean opportunity to buyat a very atrractive price.

Hospira (NYSE:HSP)shares are trading at $54.26.Hospirais a specialty pharmaceutical and drug delivery company. The 50 day moving average is about $54.26 and the 200 day moving average is $55.43. These shares are in a downtrend so I would buy only at lower prices and when the stock stabilizes. Earnings estimates forHSP areabout$3.94per share in 2011 and$4.47 for 2012.

WhyHospira could be an attractive target: HSP could be an interesting target for a major pharmaceutical, many of whom have substantial cash balances an declining revenues from drugs going off patent.

Seagate Technology (NASDAQ:STX) shares are trading at $13.15.Seagate is a leadingdata storage device maker. The 50 day moving average is about $13.84 and the 200 day moving average is about $13.49. Earnings estimates forSTX are just over $1.21 per share in 2011 and$1.88 for 2012.

WhySeagate could be an attractivetarget: Seagate looks undervalued, and has had persistent buyout interest for months now including the interest from TPG Capital a few months back (deal did not happen) which you can read about here.

Leap Wireless (LEAP) shares are trading at $13.07.Leapis a wireless communications provider. The 50 day moving average is about $13.31 and the 200 day moving average is $12.32. Earnings estimates forLEAP areexpected to be negative for 2011.

WhyLeap could be an attractive target: Leap might be an interesting target for a major wireless provider, many of whom have substantial cash balances. These shares are trading for not much more than book value which is stated at $11.62.

Petrohawk Energy (NYSE:HK) shares are trading at $21.44.Petrohawkisengaged in oil and natural gas exploration and production. The 50 day moving average is about $20 and the 200 day moving average is $18.11. Earnings estimates forHK areabout86 centsper share in 2011 and$1.40 for 2012.

WhyPetrohawk could be an attractive target: HKmight be an interesting target for a majoroil or natural gas company. These shares have been considered to be a buyout target by many and this industry has seen a wave of buyout deals.

Myriad Genetics, Inc. (NASDAQ:MYGN) shares are trading at $18.84.Myriadis amedical diagnosticscompany. The 50 day moving average is about $20 and the 200 day moving average is $18.50. Earnings estimates for MYGNareabout$1.02per share in 2011 and$1.18 for 2012.

WhyMyriad could be an attractive target: MYGN might be an interesting target for a major pharmaceutical company, many of whom have substantial cash balances and declining revenues from drugs going off patent. This company has plenty of cash on the balance sheet which also makes it an ideal takeover target.

Range Resources (NYSE:RRC) shares are trading at $49.92.Rangeisengaged in natural gas exploration and production. The 50 day moving average is about $48.47 and the 200 day moving average is $42.19. Earnings estimates forRRC areabout98 centsper share in 2011 and$1.41 for 2012.

WhyRange could be an attractive target: RRC might be an interesting target for a majoroil or natural gas company. These shares have been considered to be a buyout target by many, although they look expensive to me.

InterActiveCorp (IACI) is trading around $29.96.InterActiveCorp operates a number of well knownInternet sitesand isbased in New York. The 50 day moving average is $29.96and the 200 day moving average is $26.87. IACIis estimated toearnabout$1.57per share in 2011.

WhyInterActive could be an attractive target: IACI might be an interesting target for a majorInternet, technology or retail company seeking to acquire IACI forthe further development ofthe many websites it owns. For example "Urban Spoon" is owned by IACI andis competing with the highlyvalued Open Table (NASDAQ:OPEN) which has amarket cap similar to that of IACI. Based on the valuation of OPEN, IACI looks downright cheap

The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specificinvestment advice. The information contained herein is for informational purposes.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TAP over the next 72 hours.