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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