With a new year rapidly approaching, investors are making a
variety of lists about what individual stocks, sectors and themes
to keep an eye on in 2013. It feels like this is the case every
December, but market participants are once again turning their
attention to what companies will make credible takeover targets
As been noted time and again, buying a company's shares simply
because it is rumored to be an acquisition candidate is a flawed
strategy. If that takeover does not come to fruition, investors
can be left holding the bag on shares that fell victim to a "buy
the rumor, sell the news" scenario.
Along those lines, conservative traders can use
ETFs to make sectors bets on M&A activity
. The rub there is that, just because one holding in a particular
in an ETF gets bought at a 20 percent premium, that does not mean
the ETF will jump that much.
Traders and investors need to be selective when it comes to
playing the M&A waiting game. Here are some of the stocks
that may not make it through 2013. For a good reason that is -- a
Cobalt International Energy (NYSE:
Shares of Cobalt have plunged this week after the company said it
will sell $1.2 billion of convertible senior notes due 2019.
Those notes can be converted into Cobalt common stock at $35.68
per share, which is well above where the stock currently resides,
but the dilution suffered by current investors was met with an
Looking forward, Cobalt is viewed as one of the better ways
for U.S. investors to get exposure to
Angola's soaring oil production
. That alone makes the company a valid takeover target because
Angola, an OPEC member, is one of Africa's largest oil
To that end, Cobalt has been mentioned as an acquisition
candidates. Last year, BHP Billiton (NYSE:
) was rumored to be interested, but the world's largest mining
company is seemingly tied to every materials sector takeover
rumor. Last week, Chevron (NYSE:
) was mentioned as a possible suitor for Cobalt,
in a Bloomberg report
Something to note: Goldman Sachs (NYSE:
) is a
. It is a foregone conclusion that the bank would love to turn a
nice takeover-inflated profit on that investment.
The maker of its namesake whiskey and other popular brands such
as Makers Mark, Sauza, Courvoisier and Canadian Club has spent
time in the takeover rumor mill. The rumor floated in 2011, but
obviously nothing came to fruition.
That rumor has gained steam again recently, particularly after
) dropped its bid to acquire Cuervo tequila. Not only did Diageo
do that, but it is believed the U.K.-based company will end its
Cuervo distribution agreement. That leaves Diageo with no tequila
exposure at a time when the beverage is one of the
fastest-growing segments of the spirits market.
Beam has a tequila brand in Sauza. Diageo could afford to
acquire Beam and there are reports of a possible
partnership between Japan's Suntory and
to make a run at Beam.
Beam is up almost 13 percent in the past month and that might
be the signal that a takeover bid is imminent. It may also be a
sign that the premium the acquirer will pay is not much beyond
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