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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (2117)	4/16/2009 9:48:24 AM
From: richardred	Read Replies (1) \| Respond to of 7239

Still holding HSY. A Sign of Confidence: The Merger Rumor is Back Here’s an important sign of confidence in the market: merger rumors are back. There’s no trenchcoat-wearing con artist hawking shares of major companies — officially. But, for the past month, major stocks — including those of the companies above have rocketed on mostly unfounded merger rumors. Chalk it up to animal high spirits, traders told us. The stock markets have rallied significantly since the Dow Jones Industrial average hit an 11-year low on February 25. As a result, many in the markets are stirring again and wondering if they should start investing. Nearly all classes of investors are sitting on big cash hoards that are waiting to be deployed. For the first time in two decades, individual investors are holding more cash than stock in their accounts, according to the American Association of Individual Investors. Morningstar found over three dozen stock funds holding 40% to 100% of their assets in cash. Financial firms and hedge funds have also been holding on to as much cash as they can squirrel away. The merger rumors are partly wishful thinking, and partially a way for seasoned traders to get ahead of the next big stock jump. That is particularly true of merger arbitragers, the breed of traders who make educated guesses on how acquisitions will turn out. “It’s a sign of optimism in that people want to believe,” one arb told us about the mergers. He has a bulletin board of about 40 pending merger rumors that he is keeping an eye on. But, in the markets as in religion, belief and truth are two very different things. Consider the low quality of the merger rumors that have hit the market. There are about five permutations of mergers involving Oracle, for instance, and according to the rumorati in the markets nearly the entire pharmaceutical sector is in play. Heinz and Campbell — a perennial favorite option for merger rumormongers — have been trotted out. Another consistent favorite, Hershey’s and Nestle, have been mentioned so often that this arbitrager called the pairing “like reports of unsafe salad bars on the nightly news — they pop up every three months.” Deal Journal and our colleagues have spent untold hours chasing down these rumors. If they haven’t popped up in the pages of the paper, there’s a reason: many of these rumors are pure wishful thinking and not founded in any fact. In this quiet market, however, you can see why people would be eager for a little action. blogs.wsj.com