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Hostile takeovers are among the most compelling events in business. These events involve conflict between executives, courtrooms, and other elements seen in prime-time drama. Though interesting and entertaining, hostile takeovers do not necessarily afford attractive investment plays.

Investor attention is being drawn to the hostile takeover attempt by Martin Marietta Materials (MLM) for Vulcan Materials (VMC) which is being reviewed in court. Though this drama is good for the financial press, investors would do better by avoiding either company to focus on more boring alternatives with better fundamentals.

As alternatives to VMC and MLM, consider the following stocks with strong track records and solid credit scores:

Ticker

Company

Industry

10-Year Average ROE

Altman Z-score

BHI

Baker Hughes Incorporated

Oil & Gas Equipment & Services

16.4%

3.35

CMTL

Comtech Telecommunications

Communication Equipment

13.9%

3.67

COLM

Columbia Sportswear Co.

Textile - Apparel Clothing

16.7%

6.54

EBS

Emergent BioSolutions, Inc.

Biotechnology

15.8%

4.05

HFC

HollyFrontier Corporation

Oil & Gas Refining & Marketing

26.0%

3.17

MFLX

Multi-Fineline Electronix

Printed Circuit Boards

13.7%

4.48

MUR

Murphy Oil Corporation

Oil & Gas Refining & Marketing

19.0%

4.10

NHC

National Healthcare Corp.

Long-Term Care Facilities

13.8%

3.46

RS

Reliance Steel & Aluminum

Metal Fabrication

14.1%

3.60

SCHN

Schnitzer Steel Industries

Steel & Iron

15.6%

4.10

WIRE

Encore Wire Corp.

Diversified Electronics

14.0%

12.15

MLM

Martin Marietta Materials

General Building Materials

13.0%

2.87

VMC

Vulcan Materials Company

General Building Materials

10.3%

1.41

Unlike either target or acquiring company in the takeover scenario, these alternative stocks are all categorized as "safe" according to the Altman Z-score.* This indicates that they are not considered bankruptcy risks. Moreover, the average 10-year return on equity demonstrates how these alternative stocks have grown shareholder wealth at a respectable annual rate. It is clear from these two metrics that each of these five alternative stocks is a "high" quality stock capable of weathering bad times and delivering positive long-term results.

What's more, these stocks are cheaper and have sustainable dividend payout ratios.

Ticker

P/E

P/S

P/B

EPS growth past 5 years

EPS growth next 5 years

BHI

12.33

1.08

1.36

-11.3%

27.4%

CMTL

20.01

1.28

1.3

5.3%

35.0%

COLM

16.19

0.98

1.54

-2.1%

13.3%

EBS

25.41

2.04

1.35

-7.3%

27.5%

HFC

5.86

0.48

1.45

24.8%

22.2%

MFLX

18.27

0.78

1.53

-0.5%

20.0%

MUR

15.44

0.41

1.29

2.3%

14.0%

NHC

11.33

0.82

1.04

6.5%

12.0%

RS

12.54

0.53

1.37

-1.0%

11.2%

SCHN

10.9

0.32

1.04

-1.8%

12.2%

WIRE

14.02

0.6

1.54

-15.1%

12.5%

MLM

52.18

2.36

2.88

-20.2%

10.8%

VMC

N/A

2.3

1.56

-50.4%

8.8%

Based on better price-to-earnings ratios, price-to-sales ratios, and price-to-book ratios, these stocks are cheaper than either MLM or VMC at current market prices. Better yet, these alternative stocks have better histories of growth and higher analyst estimates for future growth than either party in the hostile takeover.

Rather than try to play a hostile takeover by taking a position in MLM or VMC, consider a diversified mix of these 11 securities as a more attractive alternative.

Please read the article disclaimer.

Source: Sidestep The Vulcan-Martin Marietta Takeover Drama With These 11 Stocks