Is investing in stocks that you think will be acquired a possible strategy?

Just curious if there are any articles about this. I was researching a stock, and noticed that company A typically did license agreements with other companies, but after a few years of licensing, they tend to buy the companies. What are some other "signals"? Have you seen any correlation between top executives of company A being on the board of potential acquisitions for a few years?

In the 10ks, I have seen a mention of $X being set aside for capex for the year, so is it best to research companies that they have previously worked with (not necessarily competition, but the equipment manufacturers, suppliers or outsourced solutions), or better to look at direct smaller competitors?

4 Comments
 

I think more often than not, you'll be wasting your time investing in companies that you THINK will get taken over. Even if you think it strategically makes sense for ABC to acquire XYZ, management knows a lot more than you and you can't possibly know their motives (well, you could...).

Now, if you find a cheap company that makes strategic sense for being acquired, you could just add "being acquired" as one of the upside outcomes. However, I still think it would be tough to make that argument.

 

Core trade value tickers. That way while your waiting for someone else with money to notice that ticker, you can earn some coin while you wait. Ps. It's okay to short value too, you don't have to just play the upside game.

 

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