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Potential Buyout Candidates

1.  Chephalon:

The company already has a next generation narcolepsy drug Nuvigil set up to replace Provigil. This new drug might even be approved to treat jet lag as an additional indication.  Cephalon's cancer and pain portfolio is both promising and already adding value, contributing to over 35% of the company's revenue.  All-in-all, consensus expects the company to earn over $6 a share for 2010, putting it at 2010 PE of under 10x. CEPH's balance sheet also has more cash than debt, thus is net cash.

2.  Activision-Blizzard

 Activision-Blizzard could be an appealing industry-consolidation target for someone larger and cash-rich like Electronic Arts or even Microsoft.  The company owns Guitar Hero, which became so popular with gamers that there's a South Park episode dedicated to it. It also owns hit franchises such as Call of Duty and World of Warcraft. Christmas is usually kind to video game sales, and ATVI's latest Call of Duty: Modern Warfare 2 is expected to be a top-seller this year.  Without even considering income from the upcoming Christmas season, ATVI already has net cash totaling about 20% of its market cap. Strip away this net cash from the company's market price and ATVI trades at about 12x 2010 earnings.

3.  KBR, Inc:

They are also a leader in the growing Liquified Natural Gas space with projects around the world. Nonewithstanding the shares' rally since March, net cash on the balance sheet equals about 30% of KBR's current market valuation due to disciplined cost control and past debt reduction.

4.  Terra Productions:

2009 has been challenging for the company's business, in relation to the boom year of 2008. Yet consensus expects Terra to remain profitable in 2009 and start growing earnings again in 2010. Despite takeover speculation, the stock remains well below the $55 level it reached in 2008.

Disclaimer: MD Capital Management does own the above mentioned companies.