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When a company announces that it is acquiring another, the target’s stock often jumps in price to reflect the takeover premium being paid for the company. This is why analysts pay special attention to rumored potential takeover/leveraged buyout (LBO) targets.

We compiled a universe of rumored potential takeover/LBO targets from various sources including CNN Money and Minyanville. We screened this universe of stocks for those with the most significant decreases in shares shorted month-over-month, indicating that short sellers believe these names will outperform.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.


(Click to enlarge)

Do you think these companies are attractive takeover candidates? Use this list as a starting point for your own analysis.

List sorted by decrease in shares shorted as a percent of share float.

1. Digital Generation, Inc. (NASDAQ:DGIT): Provides digital technology services that enable the electronic delivery of advertisements, syndicated programs, and video news releases to traditional broadcasters, online publishers, and other media outlets. Market cap of $321.71M. Takeover/LBO rumor sourced from iStockAnalyst. Shares shorted have decreased from 3.55M to 1.99M month-over-month, a change representing 6.58% of the company's 23.71M share float. The stock is currently stuck in a downtrend, trading 30.84% below its SMA20, 34.98% below its SMA50, and 56.41% below its SMA200. It's been a rough couple of days for the stock, losing 19.99% over the last week.

2. Camelot Information Systems Inc. (NYSE:CIS): Provides enterprise application services and financial industry information technology services in the People's Republic of China. Market cap of $87.56M. Takeover/LBO rumor sourced from Seeking Alpha. Shares shorted have decreased from 3.60M to 2.32M month-over-month, a change representing 4.11% of the company's 31.11M share float. The stock is currently stuck in a downtrend, trading 26.94% below its SMA20, 37.81% below its SMA50, and 83.59% below its SMA200. It's been a rough couple of days for the stock, losing 7.58% over the last week.

3. Collective Brands, Inc. (NYSE:PSS): Engages in the wholesale and retail of footwear and related accessories worldwide. Market cap of $758.34M. Takeover/LBO rumor sourced from Seeking Alpha. Shares shorted have decreased from 16.19M to 14.55M month-over-month, a change representing 2.97% of the company's 55.24M share float. The stock is a short squeeze candidate, with a short float at 24.29% (equivalent to 6.69 days of average volume). The stock is currently stuck in a downtrend, trading 12.12% below its SMA20, 11.21% below its SMA50, and 22.74% below its SMA200. It's been a rough couple of days for the stock, losing 7.46% over the last week.

4. Seattle Genetics Inc. (NASDAQ:SGEN): Focuses on the development and commercialization of monoclonal antibody-based therapies for the treatment of cancer and autoimmune diseases in the United States. Market cap of $1.73B. Takeover/LBO rumor sourced from Minyanville. Shares shorted have decreased from 25.28M to 22.86M month-over-month, a change representing 2.13% of the company's 113.41M share float. The stock is currently stuck in a downtrend, trading 16.03% below its SMA20, 21.91% below its SMA50, and 14.15% below its SMA200. The stock has performed poorly over the last month, losing 28.75%.

5. athenahealth, Inc. (NASDAQ:ATHN): Provides ongoing billing, clinical-related, and other related services to medical group practices primarily in the United States. Market cap of $1.87B. Takeover/LBO rumor sourced from Seeking Alpha. Shares shorted have decreased from 6.22M to 5.63M month-over-month, a change representing 1.71% of the company's 34.54M share float. The stock is a short squeeze candidate, with a short float at 16.18% (equivalent to 7.45 days of average volume). The stock has gained 30.19% over the last year.

6. American Eagle Outfitters, Inc. (NYSE:AEO): Operates as an apparel and accessories retailer in the United States and Canada. Market cap of $2.51B. Takeover/LBO rumor sourced from Seeking Alpha. Shares shorted have decreased from 16.98M to 14.14M month-over-month, a change representing 1.69% of the company's 167.85M share float. It's been a rough couple of days for the stock, losing 6.19% over the last week.

7. Office Depot, Inc. (NASDAQ:ODP): Supplies office products and services. Market cap of $549.72M. Takeover/LBO rumor sourced from CNN Money. Shares shorted have decreased from 35.57M to 30.96M month-over-month, a change representing 1.67% of the company's 275.58M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 3.16). The stock is a short squeeze candidate, with a short float at 11.2% (equivalent to 5.36 days of average volume). The stock is currently stuck in a downtrend, trading 16.17% below its SMA20, 12.48% below its SMA50, and 45.45% below its SMA200. It's been a rough couple of days for the stock, losing 15.52% over the last week.

8. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN): Develops and commercializes biopharmaceuticals for serious diseases and medical conditions. Market cap of $3.68B. Takeover/LBO rumor sourced from Minyanville. Shares shorted have decreased from 9.62M to 7.81M month-over-month, a change representing 1.59% of the company's 113.78M share float. The stock is a short squeeze candidate, with a short float at 6.85% (equivalent to 8.26 days of average volume). The stock has had a couple of great days, gaining 6.23% over the last week.

9. Arris Group Inc. (NASDAQ:ARRS): Develops, manufactures, and supplies telephony, data, video, construction, rebuild, and maintenance equipment for the broadband communications industry worldwide. Market cap of $1.18B. Takeover/LBO rumor sourced from Seeking Alpha. Shares shorted have decreased from 13.50M to 11.87M month-over-month, a change representing 1.48% of the company's 110.02M share float. The stock is a short squeeze candidate, with a short float at 10.2% (equivalent to 9.52 days of average volume). The stock is currently stuck in a downtrend, trading 6.64% below its SMA20, 7.6% below its SMA50, and 12.11% below its SMA200. It's been a rough couple of days for the stock, losing 7.91% over the last week.

10. J. C. Penney Company, Inc. (NYSE:JCP): J. C. Penney Corporation, Inc., operates department stores in the United States and Puerto Rico. Market cap of $6.32B. Takeover/LBO rumor sourced from Seeking Alpha. Shares shorted have decreased from 32.72M to 30.76M month-over-month, a change representing 1.36% of the company's 144.21M share float. The stock is a short squeeze candidate, with a short float at 17.29% (equivalent to 5.58 days of average volume). It's been a rough couple of days for the stock, losing 6.5% over the last week.

*Short data sourced from Yahoo! Finance, all other data sourced from Finviz. To access the complete list of takeover targets, click here.

Source: 10 Takeover/Leveraged Buyout Targets With Bullish Short Trends