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Strategies & Market Trends : Value Investing

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To: Sergio H who wrote (48647)	7/10/2012 11:42:21 AM
From: NikhilJog	1 Recommendation Read Replies (1) of 78728

On M&A - Clown and Sergio - I just want to make few points - US corporations have historical amount of cash on balance sheet, on and off shore. Simultaneously, we still have an ongoing deleveraging cycle and lot of macro headwinds for consumers to actually go out and spend a shit load, therefore organic growth has slowed down. Earnings estimates have come down due to two main reasons - one, because EPS comps have gotten tougher and second the spend is not what firms thought it will be. However, we still need to grow. How will we do that? Firms will do that inorganically! However, there needs to be a catalyst to drive the M&A thats building steam. For example - healthcare is going to see M&A - legislative catalyst from obamacare. Wellpoint acquisition on monday is a case in point so is an acquisition by Thomson Reuters. Therefore you have to just look for catalysts that will drive the M&A growth. i believe there will be a lot of M&A in distressed sectors undergoing restructuring, or where there are considerable margin expansion due to legislative catalysts which opens up avenues for growth and EPS expansion. Just some quick thoughts.

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