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BEHIND THE MONEY: Stock Market Would Be Lost This Year Without Mergers

The majority of top performers in the S&P 500 this year are as the result of a takeover, keeping a teetering stock market near the unchanged mark for 2010 in the face of fears of a global debt crisis, continued problems with the the U.S. consumer and higher interest rates. The most recent deal came over the weekend when life sciences instrument company Millipore was purchased by Germany's Merck KGaA for $107 in cash. Shares of Millipore, an S&P 500 Index member, are now up more than 45 percent this year.

Among other S&P 500 members: Coca-Cola Enterprises, up 21 percent this year, is being purchased by Coca-Cola. Oil-Services firm Smith International, whose shares have gained more than 50 percent, is being acquired by Schlumberger . Chemical company Airgas and fertilizer maker CF Industries have gained both put in double-digit returns of hostile takeovers.

In response to the severe recession, "trends in balance sheet cash, free cash flow and share repurchases over the past several years have been increasingly positive," wrote Brian Belski , Oppenheimer's Chief Investment Strategist, in a note entitled 'Market Poised for M&A Revival'. "These factors put companies in an excellent position to explore potential merger or acquisition possibilities. Belski also cites the pressure on companies to show some revenue growth this year even in this choppy economic environment. Further evidence of a fruitful takeover environment, is that even AIG was able to unload its Asia life unit to Britain's Prudential this weekend.

But other than helping keep a floor under your S&P 500 index fund position, how does a regular investor ride along with this trend?

"You can guess the industries where the deals are taking place and even if it's not the stock you own, it should help your stock," said Karen Finerman, 'Fast Money Trader' and president of hedge fund Metropolitan Capital Advisors. There's a two-fold reason for the industry to trade higher, said Finerman . The bids "raise the valuation of the sector and bigger competitors will feel the need to compete by getting even bigger, so they will have to look for a target in who is left."

Including deals not involving just S&P 500 companies, the activity seams to be concentrated in the Bio-pharma complex (see unsolicited bid for OSI Pharmaceuticals Monday), commodities and even the real estate space. Merger and acquisition activity last year was an anemic $795 billion, the lowest in 6 years, according to Dealogic, as the corner office waited for more clarity on the recession.

After this year's already blockbuster buys of S&P 500 members, Oppenheimer's Belski believes the next wave of acquisitions could come from the small to mid-cap space. His team ran a screen in search of possible targets using metrics that reflect "streamlined operations, solid and improving earnings and revenue outlooks." Among the companies on his screen that Oppenheimer individual stock analysts also rate as 'outperform' are Bristow Group, a provider of helicopter services to the energy industry, Stericycle , a waste-processing firm, and Lender Processing Services, a maker of technology systems for the mortgage lending industry.

A second-derivative way to play the uptick in dealmaking is Greenhill & Co., a smaller boutique investment bank in New York, according to traders. The stock "is one big deal away from crushing things," said Guy Adami, managing director of Drakon Capital and a 'Fast Money' trader. Greenhill was upgraded to 'market outperform' today by JMP Securities.

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Trader disclosure: On March 1st, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Kaminsky Owns (EPV); Kaminsky Owns (LULU) Puts; Najarian Owns (BAC) Call Spread; Najarian Owns (INTC) Calls; Najarian Owns (JDSU) Calls; Najarian Owns (MRVL); Najarian Owns (NTAP) Calls; Najarian Owns (AKAM); Najarian Owns (MRVL); Najarian Owns (NTAP) Calls; Seymour Owns (AAPL), (BAC), (F), (INTC), (NIHD); Kelly Owns (FXY) Puts; Finerman's Firm Owns (MIL); Finerman's Firm Owns (OSIP); Finerman's Firm Owns (XBI); Finerman's Firm Owns (IBB); Finerman's Firm Owns (ARG) Calls; Finerman's Firm Owns (GGWPQ); Finerman's Firm Owns (SII) Call Spreads; Finerman's Firm Owns (ACL); Finerman Owns (AAPL); Finerman's Firm And Finerman Own (GOOG); Finerman's Firm Owns (QCOM); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm And Finerman Own (JPM); Finerman's Firm Owns (IBM); Finerman's Firm Owns (MIL); Finerman's Firm Owns (OSIP); Finerman's Firm Owns (XBI); Finerman's Firm Owns (IBB); Finerman's Firm Owns (ARG) Calls; Finerman's Firm Owns (GGWPQ); Finerman's Firm Owns (SII) Call Spreads; Finerman's Firm Owns (ACL);
Terranova Owns (GLD) March Puts; Karabell Owns (RIMM), (UYG), (AAPL), (NOK), (XES), (VALE), (TC); Jon Najarian Owns (AAPL), Is Short (AAPL) Calls; Jon Najarian Owns (BAC), Is Short (BAC) Calls; Jon Najarian Owns (C), Is Short (C) Calls; Jon Najarian Owns (GS), Is Short (GS) Calls; Jon Najarian Owns (MIL), Is Short (MIL) Calls; Jon Najarian Owns (MS), Is Short (MS) Calls; Jon Najarian Owns (QCOM), Is Short (QCOM) Calls; Jon Najarian Owns (RIMM), Is Short (RIMM) Calls; Jon Najarian Owns (WFC), Is Short (WFC) Calls; Jon Najarian Owns (WMT), Is Short (WMT) Calls; Jon Najarian Owns (TSL) Call Spreads; Jon Najarian Owns (SII) Call Spreads; Jon Najarian Owns (CRM) Call Spreads; Jon Najarian Owns (MU) Call Spreads; Nations Owns (MSFT), (SPY)

For Tim Seymour:
Seygem Asset Management Is Short (FCX)
Seygem Asset Management Owns (VIP)
Seygem Asset Management Owns (VIP)

For Brian Kelly:
Kanundrum Capital Owns (C)
Kanundrum Capital Owns (JPM)
Kanundrum Capital Owns (CS)
Kanundrum Capital Owns (DB)
Kanundrum Capital Owns (NBG)
Kanundrum Capital Owns (EWP)
Kanundrum Capital Owns (EWJ)
Kanundrum Capital Is Short Yen
Kanundrum Capital Is Short British Pound
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short (GS)

For Joe Terranova:
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.