Netflix, Inc. (NFLX), Time Warner Inc (TWX) & Five Takeover Rumors And the Hedge Funds Who Own Them

Publicly traded companies are often acquired at a large premium to their market price pre-announcement, and so rumored takeovers- whether or not they turn out to be true- can cause speculators to pile into the stock. These stocks aren’t necessarily good buys, but certainly investors considering buying (or shorting) them should be aware of the potential for a takeover. We track quarterly 13F filings from hedge funds and other notable investors as part of our work developing investment strategies (for example, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year). Here are five stocks which have been the subject of recent takeover rumors:

ICAHN CAPITAL Carl Icahn

Billionaire activist Carl Icahn has taken a large stake in Netflix, Inc. (NASDAQ:NFLX) and there has been some speculation that he might push to sell the company. He owned 5.5 million shares as of the beginning of this year (find Icahn’s favorite stocks). Other analysts have claimed that Netflix, Inc. (NASDAQ:NFLX) could be a target purchase for a large technology company such as Microsoft to help win the “living room wars” between different consumer devices. Netflix, Inc. (NASDAQ:NFLX)’s stock price has been very volatile over the past few years, and is quite expensive at present with a forward earnings multiple of 69.

There’s a good deal of resistance to the idea, but analysts continue to suggest that CBS (NYSE:CBS) might merge with Time Warner Inc (NYSE:TWX). CBS’s stock price rose slightly on May 1st after the company slightly beat analyst expectations on both top and bottom lines for the first quarter of 2013, with earnings rising by 22% versus a year earlier. Analyst consensus for 2014 implies a forward P/E multiple of 14. Greenlight Capital, managed by billionaire David Einhorn, increased its holdings of CBS by 24% in Q4 2012 to a total of 5.4 million shares (see Einhorn’s stock picks).

A new round of rumors have popped up regarding BMC Software, Inc. (NASDAQ:BMC), a $6.5 billion market cap enterprise software company, receiving two different offers from consortiums led by private equity funds KKR and Bain Capital. Rumors of a BMC Software, Inc. (NASDAQ:BMC) buyout have been common for some time. At its current price the company does not look like too much of a value, but Wall Street analysts are bullish judging by their forecasts for future earnings per share. Billionaire Paul Singer’s Elliott Management bought over 13 million shares of BMC Software, Inc. (NASDAQ:BMC) between October and December (check out more stocks Singer was buying).

Joy Global Inc. (NYSE:JOY), a manufacturing of mining equipment, has been experiencing some takeover rumors regarding an acquisition by larger equipment companies. The industry is being avoided by many investors given the current uncertainty over macro conditions, with the result being that Joy trades at less than 10 times earnings whether we use trailing numbers or expectations for the fiscal year ending in October 2014. Of course, it’s possible that caution is warranted with the stock’s beta being 2.0. Renaissance Technologies, whose founder Jim Simons is now a billionaire, was buying shares of Joy Global Inc. (NYSE:JOY) in the fourth quarter of 2012 (research more stocks Renaissance likes).

Icahn has also been a buyer of Nuance Communications Inc. (NASDAQ:NUAN), a $6 billion market cap voice and language software company; Nuance Communications Inc. (NASDAQ:NUAN) has been rumored to have engaged sell-side advisors following interest from private equity investors. The company is, if anything, a growth play: the trailing earnings multiple is high but the forward P/E is more reasonable (at 9) and analyst expectations for growth over the next several years result in a five-year PEG ratio of 0.7. Nuance Communications Inc. (NASDAQ:NUAN) fell 19% after its report for the second quarter of its fiscal year (the quarter ending in March) underperformed expectations and the company posted a weak outlook for the year.

Disclosure: I own no shares of any stocks mentioned in this article.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!