2 Speculative Acquisition Targets With Insider Buying

Includes: BDBD, SQNM
by: Bret Jensen

The "Risk On" trade switch is still in the up position for the markets for the time being. As Chuck Prince of Citicorp once infamously said, "As long as the music is playing, you've got to get up and dance." The market has also seen a substantial pickup in M&A activity over the last few months. Here are two $5 stocks with insider buying that I could see being acquired as long as the animal spirits continue to roam free in the markets.

Smart Balance Inc. (SMBL), a consumer food products company, distributes various food products in the United States and internationally. The company offers buttery spreads, sticks, and sprays; fat-free, 1% lowfat, and lactose-free milk products; peanut butter; cooking oil and cooking sprays; light mayonnaise dressing; microwave popcorns; and various recipes under the Smart Balance name. (Business Description from Yahoo Finance)

4 reasons Smart Balance is a buy at $5 a share:

  • Several insiders bought new shares in November at current price levels.
  • The stock has a low five year projected PEG (.86) and sells for just 1% over book value
  • The mean analysts' price target on SMBL for the 7 analysts that cover the stock is over $7 a share.
  • The stock has an enterprise value of approximately $600mm and analysts expect 20% revenue growth in FY2012. Given the company's market capitalization and rapid sales growth in a fast expanding niche, a major player like Kraft (KFT) could easily be an acquirer.

Sequenom Inc. (NASDAQ:SQNM) provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research. (Business Description from Yahoo Finance)

4 reasons SQNM is a speculative buy at under $5 a share:

  • Insiders have bought approximately 100,000 in net new shares over the last few months.
  • Revenues are growing rapidly. SQNM should clock in with 18% sales growth for FY2011 and analysts project over 40% revenue growth in FY2012.
  • The median price target on Sequenom for the 10 analysts that cover it is $7.50 a share.
  • Given the increasing importance of genetic testing, SQNM's low enterprise value (<$400mm) and rapidly accelerating revenues; this firm could attract the interest of a major testing firm like Laboratory Corporation of America (NYSE:LH).

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