The Takeover Targets System
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DESCRIPTION:

Date updated:07-01-2007

This is a simple long only pattern that buys stocks it believes are good takeover targets at the beginning of each month.

If a stock trades at a low multiple of enterprise value over earnings, it is cheap for other companies or private equity firms to take it over.

BUY: On the first day of the month, buy all stocks trading at a multiple of enterprise value over EBITDA of less than 5. Enterprise value is market cap + debt - cash.

SELL: On the last day of the month if the company is taken over, or if the company no longer fits system criteria.

Backtest: Simulated on all S&P 1500 stocks from January 2000 until December 2006. Simulated using 5% of equity per trade.

Results: 191 of 319 (60%) trades profitable. Average return per trade: 5.73%

Since this system at times triggers many simultaneous buys, going forward we also filter by projected long term growth of 15%, a debt ratio of less than 0.3, revenues of over $200 Million and a market cap of less than $3 Billion.

To the left we will keep track and update monthly the stocks that meet the criteria for the system. We will update at the close of the last day of each month. If one misses the buys at the beginning of the month and wants to buy intra-month, only buy if stock is trading below its opening price on the first day of the month.

symbol name last price % change open
  • +
  • RNT
    Aaron Rents Inc
  • $24.54
  • +4.29%
  • $23.54

No Analysis added

People owning RNT also tend to own: AMDARDCHINADIODGRMNHAWKIYE

  • +
  • BRNC
    Bronco Drilling C
  • $17.30
  • +0.29%
  • $17.38

No Analysis added

People owning BRNC also tend to own: LMSWIREEXPSAIEWZGGGLBL

  • +
  • PDC
    Pioneer Drilling
  • $18.30
  • +0.16%
  • $18.12

No Analysis added

People owning PDC also tend to own: AMXBACBBCMIGPPFESONSDT

  • +
  • DSW
    Dsw Inc.
  • $13.39
  • -2.19%
  • $13.80

No Analysis added

People owning DSW also tend to own: INAPSPARIDCCKBALBNFLXNMHCPDC

  • +
  • IDCC
    Interdigital Inc
  • $21.91
  • -0.99%
  • $21.97

No Analysis added

People owning IDCC also tend to own: JCOMAAPLPANLRIMMSHLDSLBBAC

  • +
  • NFLX
    Netflix Inc
  • $30.72
  • +1.89%
  • $30.01

No Analysis added

People owning NFLX also tend to own: GMEGOOGHSYKONKEPALMPBG

  • +
  • UNT
    Unit Cp
  • $72.69
  • -0.78%
  • $74.09

No Analysis added

People owning UNT also tend to own: ACOAXECENXCMTLCPOHBANHURC

  • +
  • HERO
    Hercules Offshore
  • $31.59
  • -0.19%
  • $31.38

No Analysis added

People owning HERO also tend to own: CRGNDNDNINIRBTNGENPXLWSIX

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10/25/2007 08:21 AM CDT Asked by tradeallprofits
Never forget that a market that goes up on less than favorable conditions will always come down much harder!

08/16/2007 10:04 AM CDT Asked by phaedrus1962
Shouldn't this trading system have been updated on Aug. 1? Or was it, and the "Date updated: 07-01-2007" below the System Description just means that the description was updated on that date?

07/24/2007 08:21 AM CDT Asked by marcksgt
They are updated on the first of every month. See top of page on right

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