As I expected, Monday turned into a mirror image of Friday’s session, whereby the markets rose modestly, offsetting Friday’s modest declines. A big tech takeover in which Intel (INTC) agreed to purchase Altera (ALTR) for $16.7 billion in cash was announced. If INTC does not have the cash, the company will raise it in the credit markets at low rates for a long period of time, without any problem.
It is these low interest rates, which will continue for some time, whether or not the FOMC tightens modestly, that is fueling growing merger and acquisition activity. Low costs of capital make it easier for companies to buy rather than build. Prognosticating a potential takeover is a tough endeavor, but can be done from time to time, Look for second tier firms, not in terms of quality but market cap that have unique products or business lines. From those stocks you might have a potential takeover candidate. I have had many stocks taken over my three decades of investing. The only stock that I foresaw as a takeover candidate that came true was Caribou Coffee, which I think went too cheap.
Opko (OPK), one of our two big drug / healthcare plays along with Mylan (MYL) surged nearly 4% on news that the company submitted a new drug application to the FDA. Imagine what will happen to the stock if the application is approved.
The economic calendar will deliver factory orders for Aopril, which if you ask me is stale data, so it might not carry much weight. As for earnings, they are now far and few between, with only Cracker Barrel (CBRL) interesting yours truly.
The story is the same: equity markets will continue to bounce around while you should be prepared for what I believe is certain to be another run at all-time highs in the major indexes sometime in June. In the current market environment, cash is not your friend, stocks are.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long MYL & OPK — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
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