With stocks flat on the year, it’s becoming more difficult for investors to find winning stocks.
Your neighbor may have bragged about buying Facebook at $116 at the end of 2016, when it climbed to $178 by the end of 2017 for a 53% gain.
Ask them how they feel now.
While the market might be treading water right now, it’s not impossible to find winners. And some of the biggest short-term gains in 2019 could be made thanks to mergers and acquisitions.
For instance, cigarette maker Altria Group Inc. (NYSE: MO) announcing a 45% stake in Cronos Group Inc. (NASDAQ: CRON) on Dec. 7 sent the CRON stock price from $9.92 on Dec. 6, 2018, to an intra-day high of $13.95 the next day.
That’s a 40.62% profit in less than a day.
Compare that to the 1.75% loss of the Dow so far in 2018, and you see why acquisitions and large investments are such game changers for shareholders.
All you need to do is be in the right place at the right time.
And for 2019, we’re going to show you how to set yourself up for success, as we’ve identified three potential takeover targets.
Now, there’s no guarantee any of these firms will be purchased, and the stock prices could be volatile throughout 2019, like we’ve seen with the broader market at the end of 2018.
Never invest what you can’t afford to lose.
However, if you understand the risks, this could be your shot at real moneymaking returns in a short time…
2019 Acquisition Target, No. 3: Barnes and Noble Inc.
- Founded: 1974
- Market Cap: $514 Million
- One-Year Price Target: $7.50 (Needham)
Barnes and Noble Inc. (NYSE: BKS) was originally called Arthur Hinds and Co. in 1886, and the bookstore was known as an innovator in the 1970s.
In 1974, Barnes and Noble became the first bookstore chain to advertise on television, and it became the first bookseller in the United States to discount books in 1975.
However, the brand has struggled thanks to Amazon.com Inc. (NASDAQ: AMZN) and internal scandals.
As of May 12, 2018, sales have slid for 11 straight years. Being located near malls, which are seeing massive declines in traffic (25% of malls are expected to be closed by 2022), hasn’t helped the company and its more than 600 retail locations.
Many customers simply prefer to click a few buttons on Amazon and have their book waiting in their mailbox in a day or two, as opposed to spending an hour driving to a store, looking for parking, and trying to find a book.
On top of changing consumer preferences, Barnes and Noble fired former CEO Demos Parneros on July 3, 2018, for violating company policies.
It wasn’t shared exactly what policies he violated, but he was only on the job for two years.
His predecessor, Ronald Boire, was fired in 2016.
It’s hard for a company to keep innovating and increase sales if CEOs are constantly leaving.
Of course, BKS could still make a solid acquisition target. It’s a well-known brand and sells over 190 million physical books every year.
And on Oct. 3, 2018, reports said the bookstore could seek a buyer. That sent the stock price up 29.46% from $5.60 on Oct. 3, 2018, to $7.25 per share on Oct. 11, 2018.
Needham projects the BKS stock price will trade for $7.50 in the next 12 months. From the opening price of $6.79 on Dec. 10, 2018, that’s a potential profit of just 10.45%.
Now, BKS does pay a dividend of $0.60 (8.80%).
So you can get paid a massive yield and could earn a smaller premium if Barnes and Noble is sold.
A buyout could send the stock price higher, but this isn’t a stock worth holding long term because of the lack of leadership and slumping sales.
Fortunately, there are two bigger potential profit opportunities through M&A activity.
In fact, this company could be next on Jeff Bezos’ shopping list.
And as we’ve seen with Whole Foods, this could create a double-digit profit opportunity in a single day…
2019 Acquisition Target, No. 2: Sprouts Farmers Market Inc.
- Founded: 2002
- Market Cap: $3.09 Billion
- One-Year Price Target: $32 (RBC Capital Markets)
Sprouts Farmers Market Inc. (NASDAQ: SFM) is a supermarket chain headquartered in Arizona.
It has more than 300 stores in 19 states and 2.9 million weekly shoppers.
Sprouts says its customers are:
- Well educated
- Middle to upper middle income
- Interested in healthier eating
- Eager to save money and spend wisely
Most of its foods are minimally processed and free of artificial flavors, colors, and preservatives.
And it doesn’t matter if this food costs consumers a little more…
In a 2015 Nielsen Global Health and Wellness Survey, 88% of the 30,000 individuals polled said they were willing to pay more for healthier food.
In the coming years, the demand for healthy food is only going to increase…
As of 2014, the leading cause of death in the United States is heart disease. Also, 40% of American adults were considered obese, and 20% of adolescents were obese in 2017, the highest U.S. levels ever recorded.
Aside from regular exercise, reducing stress, and avoiding smoking, diet plays a key role in protecting the heart.
Sprouts sells products like GoodBelly Probiotics, a dairy-free probiotic shot with no sugar added that is non-GMO, soy-free, and vegan. Probiotics are the “good bacteria,” which are known to help balance digestive systems.
A lack of good bacteria can lead to digestive issues, allergies, mental health problems, and obesity, according to HealthLine.com.
And because of shifting consumer demand for organic food and ingredients, Sprouts is a prime takeover target…
Interested players could include Amazon.com Inc. (NASDAQ: AMZN) and Walmart Inc. (NYSE: WMT).
Sprouts had an 18-month delivery partnership with Amazon, but that ended on May 1.
However, if AMZN CEO Jeff Bezos wants something, he’s going to get it…
Amazon paid $13.7 billion for Whole Foods in 2017, and that sent the Whole Foods stock price skyrocketing. On June 15, 2017, the Whole Foods stock price opened for $34.85 per share.
When the Amazon deal was announced on June 16, 2017, it climbed 21.03% to $42.18.
To combat Amazon, Walmart is also making a push in the food industry. In 2018, WMT planned to roll out meal kits in 2,000 stores. Walmart has also partnered with Instacart for its Sam’s Clubs retailers to offer food delivery in several states.
A grocery chain like Kroger Co. (NYSE: KR) could also be interested in purchasing Sprouts, as it is currently on a spending spree to boost sales, like its recent investments in A.I. and technology.
But even if Sprouts isn’t sold right away, there’s still reason to be bullish on the grocery store in 2019…
In the next 12 months, RBC Capital Markets expects the SFM stock price to climb to $32 per share.
That’s a potential profit of 30.93% in the next year.
The best-case scenario would be the Sprouts stock price climbing 30% in the next 12 months, and then Amazon paying a premium over that to acquire SFM at the start of 2020. If it could climb 21% like the Whole Foods Stock price after an acquisition offer, that would be a 50% profit in a little over a year.
Every $1,000 would be worth $1,500.
Every $10,000 would be worth $15,000.
Every $100,000 would be worth $150,000.
That’s a stellar return for just a year.
And while Sprouts has us excited, we uncovered a potential triple-digit profit opportunity in 2019 that’s really making us drool…
2019 Acquisition Target, No. 1: TiVo Corp. (NASDAQ: TIVO)
- Founded: 1983
- Market Cap: $1.23 Billion (12/10/18)
- One-Year Price Target: $25 (BWS Financial)
TiVo Corp. (NASDAQ: TIVO) is a powerhouse of entertainment, offering live, recorded, and streaming television all in one place.
The TiVo Bolt Vox allows voice controls to search for shows, skip ads, and find every available episode of any series.
You can also watch shows on mobile devices and laptops with the TiVo Bolt Vox.
It makes watching shows and movies easier, but that’s not why TiVo is an acquisition target…
It’s the data.
TiVo licenses data for TV guides, and it knows exactly what shows subscribers are watching, how often they are watching shows and movies, and what devices they are watching on.
Interested parties could include content producers like Apple Inc. (NASDAQ: AAPL), Alphabet Inc. (NASDAQ: GOOGL), Comcast Corp. (CMCSA), and Amazon.
This would give companies data on what shows are popular before they sign off on making new shows.
It would also give them information on how to market their shows.
For example, if Apple accesses the data and sees a particular show or movie is very popular, it could make an exclusive content deal where upgrading to the newest iPhone provides users with free access to that show or movie.
In 2017, there were companies reportedly interested in buying out TiVo for at least $20 per share.
At the time, TiVo shares were trading for $14 per share.
A deal never materialized, but that’s okay.
An even bigger profit opportunity has been created…
The TiVo stock price is currently trading for $10.10 per share. If a company agrees to buy the entertainment service for $20 per share, that’s a potential profit of 98.01%.
However, that may be too conservative…
BWS Financial projects that in the next 12 months, the TiVo stock price will trade for $25 per share.
That’s a potential profit of 147%.
— Jack Delaney
Source: Money Morning