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

To: richardred who wrote (3283)	2/20/2013 11:33:39 AM
From: richardred	Read Replies (1) \| Respond to of 7243

Is This Buffett's Next Acquisition? By Shmulik Karpf - February 19, 2013 \| Tickers: BRK-A, GLW, DVA, HNZ, MCD \| 3 Comments Shmulik is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited. On Feb. 14, the management of H.J. Heinz (NYSE: HNZ), the specialty ketchup and beans manufacturer, announced that it agreed to be acquired for $28 billion by outside investors, including Warren Buffett's Berkshire Hathaway (NYSE: BRK-A). The deal is shaping up to be the largest acquisition in the food industry ever. In response to the news, shares jumped 20% to close at $72.50. Buffett's acquisition guidelines Mr. Buffett isn't looking for a hyper growth machine or for "the next best story." In that sense, the baked beans-to-ketchup group is a classic Buffett company: steady, predictable growth; small repeatable purchases unaffected by economic cycles or fashion; a wide “moat” to repel rivals in the form of one of the world’s most recognizable brands; and years of emerging market growth to come. For the last five years, earnings growth has averaged 7.1% per year. Not anything particularly exciting, but fairly high and consistent. The stock pays a dividend of 2.83% a year, and it shows an annual dividend growth rate of 6.3% a year. Sitting on a cash position of $42 billion (and counting...), Berkshire is on the hunt for other lucrative deals, both private and public. Below is a short list of prospective companies to be acquired next by Mr. Buffett. The candidates With 15% annual earnings growth over the last five years and a projected 9.8% for the next five, perhaps McDonald’s (NYSE: MCD) is a great choice. The current dividend yield is 3.3% and has been increasing at an annual clip of 10%. The company's growth rate has been 13.9% annually over the last five years. McDonald's has one of the most recognizable brands in the world. This gives it a vast competitive edge over other competitors in the restaurant business. Corning (NYSE: GLW) is another company that I'm sure Mr. Buffett keeps a file on. The specialty all-glass-related company was founded in 1851, and has since mastered the art and technology of glass making. Corning is extremely dominant in its field with the company controlling nearly 50% of the glass panel market globally, and its name is associated with high-quality products worldwide. Glass making has some serious barriers to entry as a result of heavy investments associated with plants and equipment. This fact positions Corning in an excellent spot to keep making piles of money from glass and other products. The company's quarterly revenue growth is 14% year-over-year, and it's able to maintain a very high gross profit margin of 22% due to market dominance and quality. It's now trading on the cheap at a forward P/E of only 10. DaVita HealthCare Partners (NYSE: DVA) is a sure bet on a sick future. This is another potential Heinz-like stock in the making. The kidney dialysis market is growing at an almost certain 4% a year, as more and more of the U.S. population develops diabetes. DaVita’s earnings growth rate over the last five years is an annual 15.1%, and the consensus annual growth rate for the next five years is 12.7%. The stock doesn’t pay a dividend, but sports a healthy quarterly revenue growth of 33% and gross operating margin of 17%. Buffett has been accumulating shares of DaVita at a steady pace in recent quarters. Perhaps this is a prelude for an imminent purchase of the company as a whole. Whether Berkshire Hathaway purchases any of the above mentioned companies is purely speculation. But with the financial stability, brand power and shareholder friendliness that these companies have been demonstrating over the years, perhaps you, and not just Berkshire should add them to your stock portfolio. beta.fool.com

To: richardred who wrote (3283)	3/4/2013 12:26:03 PM
From: Glenn Petersen	Read Replies (2) \| Respond to of 7243

From your list: RSH (RadioShack) has a $300 million market cap ad a $600 million book value. According to its most recent 10-K, its lease commitments total about $600 million, of which only $135 million is due in 2016 or thereafter. Very short leases. Unfortunately, this iconic brand is damaged goods. This would make a lot of sense: Amazon should just buy RadioShack By Gina Chon Quartz February 19, 2013 This item has been updated. Online retail giant Amazon has been inching toward having a physical retail presence in the US and UK through the installation of lockers at grocery stores, drug stores and other retail locations, like 7-Eleven, Staples, Walgreens and RadioShack. Amazon users can place orders online that are delivered to the lockers, avoiding hassles such as missed deliveries. But instead of setting up lockers at various random locations, Amazon could establish a broad physical presence for dirt cheap with one bold move: It could buy RadioShack. The US electronics retailer has lost more than 80% of its value in three years and is now worth just $325 million on the market. RadioShack has more than 4,400 stores in the US alone and 90% of them are within a two mile-radius of city and town centers. The scenario of Amazon acquiring an ailing brick-and-mortar retailer like RadioShack, Sears or Best Buy (the latter two of which have market caps in the $5 billion range), has been talked about in the tech and dealmaker community. Such a move could give Amazon regional warehouses, a place for customers to pick up deliveries, and a storefront for popular items. These locations could help Amazon as it expands into areas such as groceries that could benefit from same-day delivery or pickup. They might even become virtual showrooms where shoppers can place orders. Assuming it went down this path, Amazon might want bigger locations than RadioShack stores could provide. Failed department stores, for example, could serve as warehouses and distribution centers too. One reason for Amazon to not do this is that by retailing online, it has avoided having to collect state sales tax for many consumers, giving it an edge over retailers with physical stores. But that is changing. Amazon recently said it would support a bill before the Senate that would allow states to charge sales tax for online purchases. And it already collects sales tax in about half of all states now anyway. (Update: Former Associated Content (now known as Yahoo! Voices) CEO Patrick Keane suggested on Twitter that Amazon could stock stores with different items based on what customers in that zip code are ordering. Each store could be tailored to the buying habits of that geographic area.) A RadioShack acquisition could also make sense for Google. The 9to5 blog network reported that Google is planning to open retail stores in time for the holidays this year. The search giant in November announced that it was buying Canada’s BufferBox, which offers a similar locker system to Amazon’s. Google could use RadioShack stores not just as e-commerce delivery locations but also as sales centers for the growing number of devices it either produces or provides software for—think Apple stores, but for Android smartphones and tablets or ChromeBook laptops. RadioShack was the focus of deal talks in 2010, but private equity firms decided against a buyout because they saw little hope in the retailer’s future. Back then, RadioShack had a market value of about $2.7 billion, more than eight times its current level. In October, the company reported a net loss of $47 million and is scheduled to release its next earnings results on Feb. 26. The company just got a new CEO, Joseph Magnacca of drugstore chain Walgreens. It may resist a sale to give him time to try to turn RadioShack around. Magnacca is known for revamping the drugstores of Duane Reade, a Walgreens subsidiary. But customers go to drugstores all the time for miscellaneous household items. The same can’t be said of RadioShack, which has struggled to get consumers to think of it as a go-to place for consumer electronics. If Magnacca cannot turn RadioShack around, Amazon could be its savior instead. (We contacted both companies, but RadioShack declined to comment, and Amazon did not respond to a request for comment.) qz.com