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Private Equity Prowl: 3 Overlooked Stocks Primed for Buyout Bids

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Though buyouts, mergers, and acquisitions struggled over the past few years in light of higher interest rates, that trend may soon reverse. Consulting and accounting firm PwC points to three factors driving an imminent rise in buyout action: improved economic conditions, plenty of dry powder sitting on the sidelines, and a “pressing strategic need for many companies to adapt and transform business models” that often inspires buyout deals. This has led to some overlooked stocks that you should consider.

Finding buyout stocks to buy is tricky, though, since the most profitable candidates for retail investors often tend to be objectively terrible stocks. Threading the needle between stocks decent enough to hold while waiting for a buyout while still offering sufficient gains to make the waiting worthwhile isn’t easy. These three buyout stocks to buy buck that trend, though, with decent (enough) operational and financial outlooks that nevertheless remain primed for a buyout.

Arcellx (ACLX)

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Arcellx (NASDAQ:ACLX) a biotech stock focusing on cancer and autoimmune diseases, already has strong potential among buyout stocks to buy based on its longstanding partnership with its larger cousin Gilead Sciences (NASDAQ:GILD). The companies are working in tandem to develop pioneering CAR-T therapeutics. Unlike traditional cancer treatments that often involve surgery, chemotherapy, and radiation—methods with severe side effects and inconsistent results—CAR-T therapies revolutionize the approach by using the patient’s own immune system. This method “trains” immune cells to recognize and kill cancer cells, offering clear advantages over conventional treatments.

The innovation associated with CAR-T therapies comes at a high cost. Fortunately for Arcellx, Gilead is shouldering much of the financial burden. Gilead supports Arcellx with an $85 million cash payment and a $200 million stock purchase plan, providing Arcellx with sufficient funds to operate through 2027 as they continue their mission to revolutionize cancer treatment. But, with as much cash as Gilead is throwing at Arcellx, it may only be a matter of time before the larger pharma stock absorbs Arcellx in its entirety. Do yourself a favor and invest in this and the rest of these overlooked stocks.

iRobot (IRBT)

In this photo illustration the iRobot Corporation (IRBT) logo seen displayed on a smartphone screen

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Just because Amazon’s (NASDAQ:AMZN) iRobot (NASDAQ:IRBT) deal didn’t pan out, doesn’t mean that iRobot should top your list of buyout stocks to buy. Shares are down more than 70% since January, but for buyout stock seekers, the game isn’t yet over.

Amazon’s interest in iRobot wasn’t primarily about vacuum sales but about acquiring top-tier tech intellectual property. That IP portfolio remains valuable, positioning iRobot to gain significantly from its patents—either through standard operations or an alternative buyout route.

Even if another buyout isn’t in the cards, iRobot’s operational outlook is promising despite concerns about share pricing. The company’s first-quarter report showed a massive earnings improvement at $0.30 per share, reducing net negative $2.95 per share loss in the same period last year. Additionally, the company’s 2024 outlook is solid, with management projecting a conservative revenue range of $825 to $865 million. Currently, iRobot trades at just 0.35x sales, so even if the company meets its low-end target, shares could quickly rebound into double-digit territory. This is one of the top overlooked stocks on the market.

Applied Digital (APLD)

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Small-cap stock Applied Digital (NASDAQ:APLD) finds itself swimming in a much larger competitive pool, vast and pricy data centers, setting itself up as a buyout stock to buy as larger companies realize the value in owning and maintaining remote data storage and management sites.

Applied Digital builds, owns, and manages data centers throughout North America and offers its services to a range of blockchain, artificial intelligence, and cloud computing functions. The infrastructure is key to much of today’s digital economy, ultimately making the company’s $450 million market cap appealing to those interested in integrating data centers directly into their value chain.

Its buyout potential is buoyed by the fact that massive capital expenditures and upfront building costs aren’t offset by current revenue, and the company remains perennially unprofitable. While management reduced net losses and bumped sales over the last few quarters, it remains a prime target for a buyout opportunity today. If you are looking for some overlooked stocks, start here.

On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.

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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 Nasdaq, Inc.

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