More than Just M&A Targets

Investors often get themselves in a tizzy thinking about potential mergers and acquisitions, but Validea CEO John Reese says not to let recent pickups in M&A activity alter your long term approach.

Mergers and acquisitions can be “a big boost for shareholders in the short term, as the acquiring company pays a premium for the acquired firm,” Reese writes for Canada’s Globe and Mail. “But be careful: Investing in a company simply because it’s a takeover target can be dangerous. Many of the rumoured targets end up not being acquired.”

Reese recommends putting potential takeover targets through the same fundamental scrutiny you would use on any other holdings. “That way, you set yourself up for success even if a takeover doesn’t occur,” he says. “And if it does happen, you may get an added bonus.” He looks at a trio of stocks that are potential M&A targets that also have the fundamentals to impress his guru-inspired strategies. Among them: real time information and analytics provider Neustar, which gets strong interest from his Joel Greenblatt-based model.