How The Takeover Rumor Mill Led Me To A 321% Gain…
He has to be the most hated and reviled man in my home state of Louisiana. Just the mere mention of his name usually elicits a few colorful four-letter words. I’m talking about Alabama head football coach Nick Saban.
You see, Saban used to be the beloved coach of our own LSU tigers. He turned the program into a national powerhouse that steamrolled the competition in 2003, culminating in the first National Championship since 1958. Usually, in the South, that kind of thing gets a statue built in your honor. So why all the hostility now?
Because not long after hoisting the trophy, Saban bolted for the NFL. It wasn’t so much the defection itself that bothered people (nobody would begrudge an employee for making an upward career move that doubles your annual salary). But rather, it was the sneaky and under-handed manner of the departure.
Sports media outlets had long been speculating that Saban was under consideration for a top-level coaching position. It made a lot of sense – the guy had nothing left to prove at the collegiate level. But he was quick to dispel the rumors and claimed to have little interest in pursuing an NFL job. As the team prepared for its New Year’s Day bowl game, Saban privately assured his players that he wasn’t going anywhere.
But just a few days later, on Christmas, the entire state was stunned to learn that Saban had already accepted an offer to be the Miami Dolphins head coach. Many saw it as an act of betrayal. Even loyal supporters felt stabbed in the back by the clandestine meetings and lies. Saban has since said his decision to leave LSU was the worst of his professional career.
How The Rumor Mill Works In The Investing World…
Here’s the reason I bring this up…
The takeover market operates in a similar fashion. In fact, since launching my premium Takeover Trader premium service a couple of years ago, some of our biggest winners have come from the rumor mill.
For example, over a year ago, I found myself watching a Comcast (Nasdaq: CMCSA) spokesperson squirm on live television trying to dismiss rumors of a buyout as “pure speculation”.
Yet the Wall Street Journal had recently published a piece suggesting that the cable giant was on the prowl for an acquisition.
Were the rumors unfounded? Possibly. But in my experience, there is usually some truth to these leaks.
That’s why I don’t fault Nick Saban’s lack of candor. Be it college football or a multi-billion dollar corporate merger, both require the utmost secrecy. And if rumors do fly, then they must be quashed. Until it’s time to spill the news, the best course of action is to deny, deny, deny.
Comcast certainly did its part to deflect and downplay any potential talks. It even suggested the company was perfectly happy with the status quo. CFO Michael Cavanagh told reporters “we feel like we’ve got all…we need.”
The Wall Street Journal thought otherwise, claiming that Comcast was in advanced talks behind closed doors. Unnamed sources suggested the company could be making an offer for none other than Roku (Nasdaq: ROKU) — the streaming hardware company.
Over at Takeover Trader, we added ROKU to our portfolio in June 2020. When I made the case for ROKU in my original writeup, I cited a lot of the same reasons those media reports did a year later. Roku boasts around 61 million monthly active users in the United States alone. That figure had doubled in just the past two years.
What’s more, thanks to its hardware and user data, it’s a future gold mine for advertisers. It’s no wonder then, that companies ranging from Comcast to Apple to Netflix (and more) have cropped up in the rumor mill.
The Rumor Mill Can Lead To Huge Wins…
This brings us to an important point – one that’s key to our success over at Takeover Trader…
Keep in mind, Roku wasn’t cheap back then. So even if there were an offer, it might have only had a 20% or 30% premium attached.
But as it turns out, nothing ended up happening. And it didn’t even matter…
What matters is that ROKU shares zoomed from $350 to $480 in the span of about a month. All it took was just the rumor of a possible buyout to reach the ears of a few well-connected institutional players who quietly began accumulating large blocks of the stock. Hence the powerful 40% rally.
It’s important to remember that we didn’t just buy ROKU because it was a potential takeover target. Back then, the company was firing on all cylinders. But when you have a company that’s the subject of takeover rumors, it’s like adding fuel onto the fire…
While we’ve had our fair share of big winners since launching the service, ROKU has been our biggest. We entered the stock at $104 and exited roughly 14 months later for $440 – a gain of 321%.
Fast-forward to today, and things are much different for ROKU. The stock has fallen back to earth and may end up being scooped up by someone for a much cheaper price tag.
That’s irrelevant for us. We played our cards perfectly with ROKU, getting in and out at precisely the right time.
The point is that even the whisper of a “mega-merger” can lead to enormous returns. And as this example shows, it can be extremely profitable to pay attention to this space.
According to my latest research, we could wave of deals to happen in the coming months. Companies are flush with cash and eager to fuel growth in this uncertain environment.
And over at Takeover Trader, I’ve just pinpointed a potential takeover deal that could dwarf them all.
Want to get in on my next big trade? Click here for details.