FedEx Corporation (FDX), Time Warner Cable Inc (TWC): Companies Bill Ackman Could Target

As for what an activist might want to do, it’s possible that ADT could be attractive to a larger company. Some of ADT Corp (NYSE:ADT)’s competitors, like Monitronics, are owned by larger companies, and having a home security division could be attractive to telecom providers.

Comcast Corporation (NASDAQ:CMCSA), the nation’s largest broadband Internet provider, has begun to offer a home security system of its home (Xfinity Home). Perhaps Comcast’s competitors could be interested in following suit.

Time Warner Cable as a takeover target

Shares of Time Warner Cable Inc (NYSE:TWC) have rallied in recent sessions on speculation that the company could merge with Charter Communications, Inc. (NASDAQ:CHTR). There’s no guarantee that any deal is forthcoming — and perhaps that’s where Ackman could come in.

Companies on the verge of a takeover have attracted activists in the past. Most recently, Michael Dell saw his going-private plans spoiled by Ackman’s rival Carl Icahn, who has been pushing for shareholders to get a better deal.

Time Warner Cable Inc (NYSE:TWC) is mostly involved in providing cable TV services to its millions of subscribers — a relatively simple, predictable business. It’s making money, and though its customers can switch, it is often a pain to do so.

With a $33 billion market cap, $3 billion could provide enough firepower for Ackman to shake things up. Its price-to-earnings ratio of 16 is less than Comcast’s 18 — although only slightly.

Front running Pershing Square

Whichever company Bill Ackman ultimately targets, it’s likely that its shares will rally — at least in the short-term. Still, trying to guess probably isn’t wise. Shares of ADT and FedEx Corporation (NYSE:FDX) should fall if it turns out that they aren’t Ackman’s target.

Still, Ackman has laid out interesting criteria for stock picking. Profitable, large American companies with simple businesses, switching costs and high barriers to entry often make good investments — activist involvement or not.

The article 3 Companies Bill Ackman Could Target originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends FedEx. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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