15 Takeover/LBO Targets With Sufficient Cash to Cover 1+ Years of Average Operating Expenses

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 |  Includes: AMGN, BMC, ETFC, FTNT, GSK, IDCC, ITMN, MCPIQ, NOVL, NTAP, ONXX, RHT, SFSF, VRSN, VRTX
by: Kapitall

Listed below are fifteen companies that have been identified as potential takeover / leveraged buyout (LBO) candidates by various publications, including Barron’s, TheStreet.com, and StreetInsider. To access the complete list of takeover targets, click here.

These companies also have enough cash to cover at least 4 quarters of their past year’s average quarterly operating expense.

We calculated the average quarterly operating expense over the last four quarters, and compared it with current cash holdings for each firm. All companies listed below have more than 4x the cash for their avg. quarterly operating expense, translating into 4+ quarters of avg. operating expenses.

Companies with larger cash positions are usually seen as more attractive takeover targets because the amount of cash the takeover target is currently holding can be put towards the sale price.

Do you think these companies are likely to be taken over? Use this list as a starting point for your own analysis.

Operating expenses and cash data from Google Finance, all other data from Finviz.



List sorted by Cash/Avg. Quarterly Operating Expenses. (Note: Data collected on Wednesday afternoon)

1. VeriSign Inc. (NASDAQ:VRSN): Application Software Industry. Market cap of $6.17B. Takeover/LBO idea sourced from Street Insider. Current cash holdings at $2.06B vs. average quarterly operating expenses over the last four quarters at $112.07M. Cash/Avg. Quarterly Operating Expenses at 18.4, i.e. the company can go 18.4 quarters without generating revenue and still cover the average quarterly operating costs. VRSN has a relatively low correlation to the market (beta = 0.75), which may be appealing to risk-averse investors. The stock has gained 33.08% over the last year.

2. Molycorp, Inc. (MCP): Industrial Metals & Minerals Industry. Market cap of $3.63B. Takeover/LBO idea sourced from Benzinga. Current cash holdings at $316.43M vs. average quarterly operating expenses over the last four quarters at $21.16M. Cash/Avg. Quarterly Operating Expenses at 15.0, i.e. the company can go 15.0 quarters without generating revenue and still cover the average quarterly operating costs. After a solid performance over the last year, MCP has pulled back during recent sessions. The stock is 6.95% below its SMA20 and 10.13% below its SMA50, but remains 28.74% above its SMA200.

3. InterDigital, Inc. (NASDAQ:IDCC): Wireless Communications Industry. Market cap of $1.90B. Takeover/LBO idea sourced from StockPickr Takeover Portfolio. Current cash holdings at $541.67M vs. average quarterly operating expenses over the last four quarters at $50.04M. Cash/Avg. Quarterly Operating Expenses at 10.8, i.e. the company can go 10.8 quarters without generating revenue and still cover the average quarterly operating costs. The stock is a short squeeze candidate, with a short float at 17.27% (equivalent to 6.74 days of average volume).

4. InterMune Inc. (NASDAQ:ITMN): Biotechnology Industry. Market cap of $2.46B. Takeover/LBO idea sourced from Morningstar. Current cash holdings at $295.07M vs. average quarterly operating expenses over the last four quarters at $32.65M. Cash/Avg. Quarterly Operating Expenses at 9.0, i.e. the company can go 9.0 quarters without generating revenue and still cover the average quarterly operating costs. The stock has had a good month, gaining 18.51%.

5. Amgen Inc. (NASDAQ:AMGN): Biotechnology Industry. Market cap of $49.42B. Takeover/LBO idea sourced from R. Scott Raynovich. Current cash holdings at $17.42B vs. average quarterly operating expenses over the last four quarters at $2.38B. Cash/Avg. Quarterly Operating Expenses at 7.3, i.e. the company can go 7.3 quarters without generating revenue and still cover the average quarterly operating costs. The stock has lost 7.7% over the last year.

6. Novell Inc. (NASDAQ:NOVL): Security Software & Services Industry. Market cap of $2.04B. Takeover/LBO idea sourced from Street Insider. Current cash holdings at $1.13B vs. average quarterly operating expenses over the last four quarters at $180.87M. Cash/Avg. Quarterly Operating Expenses at 6.3, i.e. the company can go 6.3 quarters without generating revenue and still cover the average quarterly operating costs. The stock has gained 0.17% over the last year.

7. Onyx Pharmaceuticals Inc. (NASDAQ:ONXX):
Biotechnology Industry. Market cap of $2.22B. Takeover/LBO idea sourced from Street Insider. Current cash holdings at $549.31M vs. average quarterly operating expenses over the last four quarters at $98.21M. Cash/Avg. Quarterly Operating Expenses at 5.6, i.e. the company can go 5.6 quarters without generating revenue and still cover the average quarterly operating costs. The stock is a short squeeze candidate, with a short float at 6.59% (equivalent to 7.38 days of average volume). The stock has gained 8.75% over the last year.

8. SuccessFactors, Inc. (NYSE:SFSF): Business Software & Services Industry. Market cap of $2.74B. Takeover/LBO idea sourced from Street Insider. Current cash holdings at $356.46M vs. average quarterly operating expenses over the last four quarters at $67.88M. Cash/Avg. Quarterly Operating Expenses at 5.3, i.e. the company can go 5.3 quarters without generating revenue and still cover the average quarterly operating costs. Short float at 12.3% (equivalent to 8.99 days of average volume), implying the stock is a short squeeze candidate. The stock has gained 74.5% over the last year.

9. E*TRADE Financial Corporation (NASDAQ:ETFC): Investment Brokerage Industry. Market cap of $3.37B. Takeover/LBO idea sourced from Street Insider. Current cash holdings at $2.98B vs. average quarterly operating expenses over the last four quarters at $570.03M. Cash/Avg. Quarterly Operating Expenses at 5.2, i.e. the company can go 5.2 quarters without generating revenue and still cover the average quarterly operating costs. Note that ETFC is a risky stock that is significantly more volatile than the overall market (beta = 2.05). The stock has performed poorly over the last month, losing 15.76%.

10. Human Genome Sciences Inc. (HGSI): Biotechnology Industry. Market cap of $5.21B. Takeover/LBO idea sourced from Morningstar. Current cash holdings at $437.71M vs. average quarterly operating expenses over the last four quarters at $87.03M. Cash/Avg. Quarterly Operating Expenses at 5.0, i.e. the company can go 5.0 quarters without generating revenue and still cover the average quarterly operating costs. The stock has had a couple of great days, gaining 7.44% over the last week.

11. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX): Drug Manufacturer Industry. Market cap of $9.34B. Takeover/LBO idea sourced from Morningstar. Current cash holdings at $1.03B vs. average quarterly operating expenses over the last four quarters at $209.86M. Cash/Avg. Quarterly Operating Expenses at 4.9, i.e. the company can go 4.9 quarters without generating revenue and still cover the average quarterly operating costs. The stock has had a good month, gaining 18.85%.

12. NetApp, Inc. (NASDAQ:NTAP):
Data Storage Devices Industry. Market cap of $17.11B. Takeover/LBO idea sourced from Street Insider, UBS, and Marketwatch. Current cash holdings at $4.76B vs. average quarterly operating expenses over the last four quarters at $1.01B. Cash/Avg. Quarterly Operating Expenses at 4.7, i.e. the company can go 4.7 quarters without generating revenue and still cover the average quarterly operating costs. It's been a rough couple of days for the stock, losing 9.93% over the last week.

13. Red Hat, Inc. (NYSE:RHT): Application Software Industry. Market cap of $7.74B. Takeover/LBO idea sourced from Street Insider and UBS. Current cash holdings at $845.44M vs. average quarterly operating expenses over the last four quarters at $181.53M. Cash/Avg. Quarterly Operating Expenses at 4.7, i.e. the company can go 4.7 quarters without generating revenue and still cover the average quarterly operating costs. The stock has performed poorly over the last month, losing 10.63%.

14. Fortinet Inc. (NASDAQ:FTNT): Computer Peripherals Industry. Market cap of $3.18B. Takeover/LBO idea sourced from Barron’s. Current cash holdings at $313.51M vs. average quarterly operating expenses over the last four quarters at $67.34M. Cash/Avg. Quarterly Operating Expenses at 4.7, i.e. the company can go 4.7 quarters without generating revenue and still cover the average quarterly operating costs. The stock has gained 156.31% over the last year.

15. BMC Software Inc. (NASDAQ:BMC): Application Software Industry. Market cap of $8.61B. Takeover/LBO idea sourced from Street Insider. Current cash holdings at $1.55B vs. average quarterly operating expenses over the last four quarters at $371.98M. Cash/Avg. Quarterly Operating Expenses at 4.2, i.e. the company can go 4.2 quarters without generating revenue and still cover the average quarterly operating costs. The stock has gained 22.57% over the last year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.