These Five Stocks Are Buzzing Amid M&A and Other News

All three indexes are slightly lower in the pre-market today after the Labor Department reported that nonfarm payrolls increased 38,000 versus the 160,000 that many analysts were expecting. Nevertheless, there was a case for optimism as the unemployment rate fell to 4.7%, one of the lowest in a long time. Among the stocks buzzing this morning are Northstar Realty Finance Corp (NYSE:NRF), NorthStar Asset Management Group Inc (NYSE:NSAM), Colony Capital Inc (NYSE:CLNY), General Motors Company (NYSE:GM), and Talen Energy Corp (NYSE:TLN). Let’s find out why each stock is in the spotlight and see how the smart money feels about the five companies.

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At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).

A Mega-Merger in the REIT Sector

In an all-stock deal, Northstar Realty Finance Corp (NYSE:NRF), NorthStar Asset Management Group Inc (NYSE:NSAM), and Colony Capital Inc (NYSE:CLNY) are combining in a three-way merger to form Colony Northstar. Under the terms of the deal, which should close in the first quarter of next year, Northstar Realty Finance Corp (NYSE:NRF) shareholders will own 33.9% of the combined company, NorthStar Asset Management Group Inc (NYSE:NSAM) shareholders will own 32.25%, and Colony Capital Inc (NYSE:CLNY) shareholders will own 33.25%. In addition, NorthStar Asset Management Group’s shareholders will get a special one-time dividend of $128 million. Management of the three companies expect to realize $115 million in annual cost savings from the combination, and bulls of NorthStar hope that the merger will help narrow the difference between its stock price and its net asset value of around $24 a share.

Under share specific terms, Northstar Realty Finance shareholders will receive 1.0996 shares of the new combined company for each share of Northstar Realty they own, NorthStar Asset Management shareholders will receive one share of the new company for each share of NorthStar Asset Management they own, and Colony Capital shareholders will receive 1.4663 shares of the new entity for each share of Colony they own. Colony Capital and Northstar Finance are each up 2% while NorthStar Asset Management is up 4% on the news.

Of the 766 elite funds in our database, 38 funds owned shares of Northstar Realty Finance Corp, 53 were long NorthStar Asset Management, and 31 were long Colony Capital at the end of the first quarter.

On the next page, we examine General Motors Company, and Talen Energy Corp.

General Motors’ China Sales Are Strong

Despite the soft Chinese economy, demand for General Motors Company (NYSE:GM)’s vehicles in China is still strong. According to a press release, GM delivered a record 295,282 vehicles in China in May, marking a 16.9% year-over-year jump in demand. GM’s Buick, Cadillac and Baojun brands all set all-time highs for deliveries for the month, with Buick deliveries rising 61%, Cadillac deliveries rising 30%, and Baojun deliveries jumping 80% year-over-year. Strong demand in China will be a key metric to watch for, as General Motors Company (NYSE:GM) transitions to the connected/automated car future. Warren Buffett’s Berkshire Hathaway owned 50 million shares of General Motors at the end of March.

Talen Energy Sells Itself

Talen Energy Corp (NYSE:TLN)’s stock has surged by 16.5% after the company agreed to be acquired by the private equity fund Riverstone Holdings for $14.00 in cash per share. The transaction has a total enterprise value of around $5.2 billion and should close by the end of 2016. Talen has a standard go-shop period of 40 days to find a better offer from other parties. There is no assurance that the process will yield a better proposal. Talen Energy Corp (NYSE:TLN) was included in the equity portfolios of seven funds tracked by Insider Monkey at the end of March.

Disclosure: none