Four Takeover Targets for GE

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General Electric ( GE ) is on the prowl for electrical products companies. As the world's biggest maker of power-plant turbines, GE has a vested interest in the future of power generation in America. That means now is the time to buy out smaller companies with the technology for America's next-generation electrical grid rather than share the spotlight down the road.

We've seen a lot of merger activity in the market now that the economy has stabilized, most recently in the highly publicized Cadbury-Kraft marriage and previously in buyouts across big pharma during 2009. My hunch is that the electrical products and infrastructure sector is going to see a spate of mergers soon, with GE being the biggest suitor.

Here are the four possible candidates for a GE buyout in the near future, with the biggest potential to profit from this emerging trend.

American Superconductor ( AMSC )

52-week Range: $11.66-$43.95
Market Cap: $1.39B

American Superconductor Corp. ( AMSC ) is an industry leader in large-scale wind turbine designs and electrical control systems. The company has devoted a lot of its time and energy to developing a host of smart-grid technologies, including superconductor power cable systems, surge protectors and voltage stabilization systems. And don't let the company's name fool you -- AMSC is a true global player. In early February, American Superconductor landed a $70 million contract for wind turbine electrical control systems in China. That surely got GE's attention. And after four quarterly reports in a row that topped expectations by an average of more than 70%, you can bet Wall Street is paying attention to AMSC too.

Active Power ( ACPW )

52-week Range: $0.36-$1.50
Market Cap: $61.83M

Active Power ( ACPW ) is in the "power solutions" business, meaning it makes sure businesses and consumers can get the energy they need. This is a no-brainer merger target for GE, since that's what the smart grid is all about. ACPW's suite of products not only offers reliable energy storage systems and infrastructure components, but also ways to bridge the gap during power outages until utility power is restored. Although it's a tiny outfit with a market cap of just under $62 million with shares trading around $1 a piece, ACPW has massive potential. (Please note: I recommend this stock, but make sure you place a limit order 25 cents above the previous day's close when buying so you don't overpay for shares. Buy this aggressive and thinly traded stock with care.)

Jinpan International ( JST )

52-week Range: $11.33-$52.88
Market Cap: $354.02M

Jinpan International ( JST ) casts resin transformers, which are used in electric power distribution networks that decrease voltage at the end of transmission lines. In case you're not an electrical engineer, that means JST equipment converts power currents into a form that can travel over longer distances. And in case you don't watch the news, that's exactly what we need America's next-generation power grid to do. That makes JST a very likely merger candidate for GE. A bonus is that the company recently topped earnings estimates by over 100%, meaning this stock is growing rapidly. Headquartered in China, this pick is also a major global power that will add to the scope of General Electric operations if it's bought out.

LGL Group ( LGL )

52-week Range: $1.18-$4.50
Market Cap: $8.98M

The LGL Group ( LGL ) manufactures electronic components that control the frequency or timing of signals in electronic circuits. In plain English, LGL gadgets make power grids smarter. That makes this company a prime merger candidate for GE. Although it's a microcap with a market size of just $9 million and a daily volume of only about 3,800 shares, LGL should definitely be on your radar. (Please note: I recommend this stock, but make sure you place a limit order 15 cents above the previous day's close when buying so you don't overpay for shares. As a thinly traded stock, LGL is very volatile.)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: ACPW , AMSC , JST , LGL

Louis Navellier

Louis Navellier

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