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Rampant Buyout Rumors False 100% of the Time This Month

Think you’ve got a hot tip on a buyout rumor? Think again. None of the rampant deal speculation in the market this month has come true, according to StreetAccount.com, a subscription service for trading professionals. The service said in a note to subscribers today that of the 74 rumors this month that it has reported on, none have come to fruition.

“This is precisely why I don’t invest on potential takeouts,” said Patty Edwards, founder of money management firm TrutinaFinancial.

Theories abound on why rumormongering is so rampant (and so wrong) these days. Some blame the massive social networking sphere, where one "tweet" can sink a stock like the Titanic. There’s also the fact that trading volume has been below average for the last month and for most of the last year, making it easier for nefarious participants to move a stock.

The real reason is most likely that deals are actually taking place. Companies have a record amount of cash on their books and their putting it to use. Global merger and acquisition volume last month hit $281.6 billion, the highest August amount on record and more than double from a year ago, according to Dealogic. That trend has continued this month with Walmart, Southwest Airlines and Unilever announcing deals just Monday alone.

These actual deals, along with this rampant speculation, has helped push the S&P 500 up almost 9 percent this month. But just because the rumors are false, doesn’t make this rally totally false also, traders said.

“It is also probably another indication that people are realizing how strong and cheap company's balance sheets are becoming,” said Brian Stutland, president of Stutland Equities. “People look at these rumored deals and believe buyout or not, the company should be valued higher.”

Exhibit A is the agriculture space. Australia’s BHP Billiton , the largest mining company in the world, bid for U.S.-based Potash in August in a move to lock-in control of fertilizer needed for the emerging world. Shares of Agrium and other related names have been among the top performers this month in the wake of the deal.

Rumors aside, investors believe that if BHP finds value in that industry, then they should too. Plus, if BHP is able to close the deal, investors will rotate money out of that stock to similar names in the space in order to keep some of the industry exposure.

To be sure, StreetAccount has been clear that the speculation is simply conjecture and has been very upfront with subscribers about the poor track record this month of these rumors, hence its note Tuesday. The service, which efficiently tracks press releases, analyst moves, SEC filings and other market intelligence for subscribers, reports on the speculation when it is affecting the stocks.

Cloud computing and data storage is another top performing area this month. This follows IBM’s announced purchase of Netezza last week and the infamous bidding war between Hewlett-Packard and Dell for 3-Par (H-P eventually won for $2.35 billion). The problem is that anything with “cloud computing” in its company description has been bid higher on the back of these deals.

Investors beware that not every one of them will be bought out, nor does each of them have an actual great product that would be attractive to another tech giant (See Pets.com, circa 1999).

For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.

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Trader disclosure: On September 28th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Pete Najarian owns (NETL) call spreads; Pete Najarian owns (CNI); Pete Najarian owns (AMZN); Pete Najarian owns (AKAM) call spreads; Pete Najarian owns (LLNW) call spreads; Pete Najarian owns (NTAP) call spreads; Pete Najarian owns (DD); Pete Najarian owns (NOV); Pete Najarian owns (RRC); Pete Najarian owns (DO); Pete Najarian owns (GDXJ); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova Owns (APA), (AAPL), (ARUN), (BMO), (C), (IBM), (HES), (JOYG), (XBI), (FTO), (OXY), (ORCL), (PEP), (POT), (RSH), (SU), (RIG), (UPL), (VRTS); Cortes is short (XLF); Cortes is short (BAC); Cortes is short (LVS); Cortes owns German Treasuries; Cortes is short the British Pound; Cortes is short corn; Weiss owns (JOYG), (BAC), (AKAM), (CSX), (VZ); Weiss is short (SF)

For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners own more than 1% of (ABAX)
Virtus Investment Partners own more than 1% of (ALK)
Virtus Investment Partners own more than 1% of (AMKR)
Virtus Investment Partners own more than 1% of (CASS)
Virtus Investment Partners own more than 1% of (CSVI)|
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Virtus Investment Partners own more than 1% of (YDNT)
Virtus Investment Partners own more than 1% of (DLUEY)
Virtus Investment Partners own more than 1% of (DRYS)

For Brian Kelly
Accounts managed by Kanundrum Capital own (GLD)|
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (ATI)
Accounts managed by Kanundrum Capital own (TIE)
Accounts managed by Kanundrum Capital own (PCL)
Accounts managed by Kanundrum Capital own (LPX)
Accounts managed by Kanundrum Capital own (RAX)
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (GPRE)
Accounts managed by Kanundrum Capital own (TIP)
Accounts managed by Kanundrum Capital are short (XLF)
Accounts managed by Kanundrum Capital are short (IAI)
Accounts managed by Kanundrum Capital are short (FDX)
Accounts managed by Kanundrum Capital are short (BCS)
Accounts managed by Kanundrum Capital are short (HYG)

For Rich Ilczyszyan
***No Disclosures***

For Carter Worth
***No Disclosures***

For David Sackler
Moab Capital Partners LLC Owns (RGS)

For Scott Nations
***No Disclosures***

Symbol
Price
 
Change
%Change
S&P 500
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AGU
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BHP
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4331
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HPQ
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IBM
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LUV
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PAR
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POT
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UNA
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WMT
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