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A Recent Buyout Offer
Pushes Take-Two Interactive (TTWO) Up More than +50%
Published:
March 3, 2008
As editor of StreetAuthority's
Half-Priced Stocks newsletter, my primary goal is to
seek out stocks that are changing hands for considerably less
than what they are really worth. And as any value investor will
tell you, this time-tested approach has proven itself again and
again over the decades.
However, for all its rewards, value investing also comes with a
few unique challenges -- like they say, "no pain, no gain." For
example, it's not uncommon to find a $30 stock trading for just
$20. But until the rest of the market catches on and realizes
that the shares are really worth more, simply identifying an
undervalued stock
doesn't exactly put any cash in your pocket.
That is why I look for catalysts that will help push a stock
toward its fair value sooner rather than later. More often than
not, these catalysts can provide some momentum to get the shares
moving -- but every now and then, they still have a little
trouble getting in gear.
Fortunately, when this happens there is still one event that
can cause a stock to zoom to its fair value overnight -- a
takeover offer. Whenever Wall Street fails to realize that a $20
stock is worth $30, quite often another company or a private
equity group will swoop in to acquire it.
With that in mind, in my April 2007 newsletter I went on a quest
for companies that appeared to be prime takeover targets. That
search turned up several possible candidates, including Take-Two Interactive (Nasdaq: TTWO, $26.50). As I pointed out at
the time, the video game publisher has been plagued by corporate
governance issues over the years, but its wildly popular
Grand Theft Auto series alone was worth billions to a
potential acquirer like Electronic Arts (Nasdaq: ERTS).
And I was right on the mark in this case
-- predicting both buyer and seller. Just last week, Electronic
Arts submitted a takeover bid of $2 billion for Take-Two, or $26
per share -- just above my fair value of $24. The stock rocketed
+55% on the news and remains above the proposed buyout price
because ERTS will likely have to shell out more cash to make this
deal happen. And there are rumors that another interested party
might even make a richer offer and trigger a bidding war.
In a more recent issue of my newsletter, I shine the spotlight on another
company that might well be in the cross-hairs of a potential
acquirer. In fact, heavy industry consolidation over the past
couple years has seen a number of its closest competitors
scooped up by private equity groups. However, even if there is
no deal on the horizon, this firm's valuable real estate assets
and copious cash flow generation imply a share price more than
+50% above current levels.
To read my complete profile of this exciting firm -- available
only to subscribers -- I invite you to join us at
Half-Priced Stocks. To learn more, please
visit
this link.
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Nathan Slaughter
StreetAuthority Staff Writer
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