ConAgra Foods, Inc. (CAG), Fifth Third Bancorp (FITB) & 5 Plays That Look Especially Vulnerable to Activist Investors

Ameren Corporation

St. Louis-based Ameren Corp (NYSE:AEE) is a utility and merchant power company that operates primarily in St. Louis and surrounding areas of Illinois and Missouri. The company uses coal, oil, natural gas, and other sources to generate its electricity. Despite adhering to a similar business model, Ameren Corp (NYSE:AEE) is in significantly worse financial shape than Consolidated Edison. The company lost about $975 million on just over $6.6 billion gross revenues in 2012. It has negative levered free cash flow and nearly $7 billion in debt to just $300 million in cash.

Invest or Wait?

With the exception of Ameren, all of these companies would normally be adequate investment targets. Out of these five, ConEd probably has the strongest finances and thus represents the “safest” choice. Long-term investors could probably make a case for ConAgra Foods, Inc. (NYSE:CAG) and Tyco International Ltd. (NYSE:TYC) as well. Those who don’t mind Fifth Third’s staggering debt load could be forgiven for making a play for that firm as well. For further information on activist investors, the companies they go after, and the strategies to take to profit from their moves click here.

For these reasons, Ameren might actually be the most likely takeover target on this list. With a market cap of less than $8.5 billion, a deep-pocketed activist would have no problem accumulating a stake in the firm and imposing his or her will on its board. With such deep-seated financial problems, he or she might decide that a “housecleaning” is in order. Investors who believe that such a move would boost the company’s long-term performance would do well to look at Ameren at these levels.

In sum, these five companies each present their own set of advantages and challenges. Investors who wish to buy into a specific firm ahead of a potential activist takeover should look to relatively weak Ameren. Those who wish to buy into a firm that can easily stand on its own would do better to look at ConEd or Tyco. Of course, all investors must perform their own due diligence before making decisions with their funds.

The article Five Stocks That Look Especially Vulnerable to Activist Investors originally appeared on Fool.com and is written by Mike Thiessen.

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