If your stock runs up on a rumor, you could use a stop-loss order to protect your capital against a share price reversal, and lock in your profit, or you could buy a put option as an insurance policy.

But other times, the rumor fizzles along with the recent stock price gains. It’s not unusual for rumors of a buyout offer to emerge a couple of days before the actual offer. Signs of a Stock Buyout: Is the Buyout Offer a Rumor or a Fact?Īre there signs of a stock buyout that you can predict? If a stock buyout is just a rumor, the stock price could climb, based upon the market’s expectation of a buyout. As value investors, you play the odds in a manner that can help your portfolio succeed, whether your stocks become takeover targets or not.

Your stock selection process can help your odds of success, but that doesn’t cancel out all other stocks’ odds of success. Do you want a company with rising profits, or a company with stagnant or falling profits? Do you want a company with lots of debt, or minimal debt? Do you want a company with an expensive stock, or an inexpensive stock? By screening your stock selections for good balance sheet characteristics, you not only end up lowering risk in your stock portfolio and increasing your odds that investors will be attracted to your stocks – thus buying them and driving the share prices up – but you also increase the odds that you will own shares of a company that a bigger company might want to acquire!Ĭan debt-ridden or money-losing companies also be takeover targets? Of course they can. Imagine that you run a big company, and you’re looking to acquire a smaller company in order to boost your profits, your product assortment or your competitive advantage. But first, you’ve got to own the takeover stock! How to Buy Stocks That Become Attractive Takeover Target Candidates Keep reading, as we’ll discuss some common scenarios that can affect your decision to hold vs. If you continue to hold the stock, that means your capital is inactive, not providing you with growth potential during that entire waiting period. That’s because after the initial run-up, which takes just a day or two, there’s usually very little remaining upside to the share price, and it could easily take 6-18 months for the buyout to be completed. Generally speaking, you should aim to sell your takeover target soon after the buyout offer emerges and the share price shoots upward. We'll show you how.ĭownload it today, FREE when you sign up for our complimentary Cabot Wealth Daily advisory! This free report aims to give you the confidence - and the right know-how - to dive right into the stock market. And unless you majored in finance or are a stock broker yourself, you may not feel confident enough to start investing on your own. The current stock market is creating huge opportunities to invest - even during a pandemic.

What is a hostile takeover