It's no surprise that Republican administrations in general are seen as more friendly towards mergers than Democrats, and since the election, arbitrage spreads (the difference between a target's deal price and its current price) have tightened to the 8-9% range from 11%.
However, on an annualized basis, there are still plenty of deals out there offering double-digit returns.
Merger-arb shop WallachBeth Capital is fan of Harman International Industries (NYSE:HAR), which earlier this month drew a cash bid from Samsung for $112 per share vs. its close Friday of $109.74. Another pick is B/E Aerospace (NASDAQ:BEAV) which closed at $59.79 and has a cash and stock deal in hand from Rockwell Collins (NYSE:COL) for $62 per share.
Lutetia Capital likes Cabela's (NYSE:CAB), which closed the week at $62.50 vs. Bass Pro Shops' $65.50 bid.
The Merger Fund's Roy Behren is confident Qualcomm's (NASDAQ:QCOM) bid for NXP Semiconductors (NASDAQ:NXPI) will pass regulatory muster. NXP's close yesterday of $99.51 is a full 10.5% below the $110 cash offer. If the deal closes in nine months, it's an annualized return of 12.6%.
Another deal with maybe overblown antitrust concerns is Danone/WhiteWave Foods (NYSE:WWAV). The spread is just 2%, but a close early next year would mean an annualized return over 10%.
Seeking Alpha contributor Chris DeMuth stays on top of merger arb spreads with his M&A Daily.
Looking at the top 50 hedge fund hotels, it's probably little surprise that Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB) top the list, with Amazon making for a top 10 holding in 61 funds, and Facebook in 57.
Rounding out the top 10 are Charter Communications (NASDAQ:CHTR), Alphabet (GOOG, GOOGL), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Yahoo (NASDAQ:YHOO), Allergan (NYSE:AGN), Bank of America (NYSE:BAC), and Priceline (NASDAQ:PCLN).
Looking at another gauge - the percent of market cap owned by hedge funds - shows CommScope (NASDAQ:COMM) leading the way, with hedge funds owning 37%. Next is Dell Technologies (NYSE:DVMT) and Expedia (NASDAQ:EXPE) at 30%, and after that: Liberty Broadband (NASDAQ:LBRDK) at 24%, LinkedIn (NYSE:LNKD) at 21%, Constellation Brands (NYSE:STZ) at 20%, and Humana (NYSE:HUM) and WhiteWave Foods (NYSE:WWAV) at 19%.
Data from NPD Group indicates that 11% of millennials use craft coffee brewing to satisfy their daily coffee cravings.
It's a trend to watch with younger consumers representing 44% of at-home craft coffee brewers of which a third live in urban areas.
It's not clear if the increase in at-home craft coffee consumption is peeling away meaningful packaged coffee sales or store traffic to chains, but there could be a reputational risk to national brands on quality in the future.
Shares of Gores Holdings (NASDAQ:GRSH) are on watch after an article by SA contributor Dane Capital Management points to the enormous upside of the merger with Hostess Brands.
Despite a couple of trips down bankruptcy lane, Hostess is now well-positioned with no legacy pension liabilities and a leaner manufacturing setup. Dane notes that valuation compared to food peers (MDLZ, HSY, WWAV, OTCQX:DANOY) looks attractive. The firm also pulls out some Black-Scholes analysis in evaluating the GRSH warrants.
Hostess is more mainstream than some may think. A recent issue of Walmart Today featured Deep-Fried Twinkies in all their splendor.
Adjusted gross margin rate improved 30 bps to 35.5%.
Adjusted operating margin rate grew 70 bps to 9.9%.
Adjusted EBITDA +24% to $143M.
FY2016 Guidance: Net sales growth: +10.5% to 11.5% (+11% to 12% on a constant currency basis); Adjusted operating income growth: + High teens to twenty %; Tax rate: 33% to 34; Adjusted diluted EPS: $1.32 to $1.35; Adjusted Diluted EPS Excluding China J.V.: $1.38 to $1.41.