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Five Stocks Ripe for Takeovers?

Tuesday, 10 Jul 2012 | 8:49 AM ET
Aldon | Stone | Getty Images

When Lincare Holdings agreed to be bought last week by a German company, it was no surprise to analyst Ken Hackel of CT Capital, best known for his book, “Security Valuation and Risk Analysis.”

It was on his short-list of companies he thought could be bought — and the second so far this year. (The first was Quest Software .)

What else is on his list? Here are five names (alphabetically):

  1. Ancestry.com , the somewhat controversial (as in high short-interest) family history website.
  2. Buckeye Technologies , which manufactures cellulose specialty products.
  3. Chicago Bridge & Iron , an engineering, procurement and construction company.
  4. Cubic Corp. , a defense contractor whose 97-year-old founder and CEO, Walter Zable — who owned nearly 39 percent of the stock — died two weeks ago.
  5. Gardner Denver , which makes industry engineering equipment.

Hackel doesn’t like these stocks just because he believes they may be acquired. As his book suggests, he’s focused on the fundamentals. And in this environment the characteristics that make for a good investment are the same that make a good takeover candidate: High cash flow yields, low debt to equity and (perhaps the most important) a stable cost of capital.

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BKI
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CUB
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GDI
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Quest Software
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