Year in Review in 7 Charts: Betting Big on M&A

Lou Basenese

Monday, December 28, 2020

It’s a new week and almost a new year.

But I’m keeping with my plan to show you a chart each day — a chart that showcases an investment trend I expect to keep charging higher (or lower) in 2021.

In other words, these columns are just as much diagnostic as they are prognostic.

In case you missed it, last week, I dished on the major market-cap rotation underway into small and micro-cap stocks and the digital transformation of, well, everything!

Today, it’s time to focus on the seemingly insatiable appetite for corporate Mergers & Acquisitions.

Why Takeovers? Why Now?

We all know the impact a takeover can have on a company’s stock price:

When a deal is announced (or even rumored) prices skyrocket.

Just ask shareholders of Portola Pharmaceuticals (PTLA).

When Alexion Pharmaceuticals (ALXN) pledged to buy the company in May, shares soared 130% higher in a blink.

Not bad for a one-day holding period!

Thankfully, Portola’s situation is not some rare occurrence. In fact, in the third quarter alone, 3,505 deals were announced.

And as you can see in the chart below, a flurry of mega deals happened in the fourth quarter.

This recent activity all but guarantees the M&A momentum will continue into 2021.

Especially since mergers represent the fastest way to grow earnings and one-up the competition...

And because historically low interest rates, stockpiles of cash on corporate balance sheets, and higher stock valuations provide all the currency necessary to finance even the most expensive deals.

In fact, I’m so convinced that this deal making will continue in 2021, I’ve decided to focus on identifying the next buyout targets for you.

If you’d like to be the first involved, you can find out more details here »

Ahead of the tape,
Lou Basenese
Lou Basenese

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