$640 million market cap coal company Walter Energy, Inc. (NYSE:WLT) (over 9 million shares of Walter are traded per day, making for plenty of volume) is reportedly exploring a sales process. Low demand for steel has trickled backwards in the supply chain to low demand for metallurgical coal, and so Walter is unprofitable on a trailing basis with net losses expected both this year and next year as well. 41% of the float is held short as many market players are apparently confident that the company will remain independent and conditions will not improve.
Insider Monkey tracks quarterly 13F filings from hundreds of hedge funds and other notable investors as part of our work developing investment strategies; we have learned, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). We can see from our database that billionaire Steve Cohen’s SAC Capital Advisors increased its stake in Walter Energy, Inc. (NYSE:WLT) in the first quarter of 2013, to a total of 3.4 million shares (see Cohen’s stock picks).
Large pharmaceutical company Roche has been attempting to buy Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), a $23 billion market cap biotechnology company whose products include blood and genetic disorder drug Soliris; Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) has reportedly hired a sell-side advisor in response. Revenue and earnings have increased quite a bit as Soliris has been a hit in the drug market, but even in forward earnings terms there appears to be some deal premium baked into the valuation with a P/E multiple of 35. The company has ongoing trials for other applications for Soliris as well as for other drugs in its pipeline.
Another potential takeover target is Chinese travel services company Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP), which provides packaged tours as well as hotel and airline reservation services, though the company has denied takeover talks. The stock has popped as a result, and now appears quite speculative with trailing and forward earnings multiples of 57 and 43 respectively. While recent reports show revenue up over 20% from its levels a year earlier, net margins have fallen leading to a decline in profits. Highbridge Capital Management, managed by billionaire Glenn Dubin, reported a position of 4.1 million shares as of the end of March (find Dubin’s favorite stocks).
Spirit AeroSystems Holdings, Inc. (NYSE:SPR), the $3.7 billion market cap aerospace parts company, is another stock experiencing takeover rumors. Specifically, Spirit AeroSystems Holdings, Inc. (NYSE:SPR) produces fuselage sections, propulsion systems, and wing systems. In its most recent quarterly report, revenue and net income grew at double-digit rates compared to the same period in the previous year and with Wall Street analysts expecting growth to continue next year the forward P/E is 10. While this is based on significant improvement from Spirit AeroSystems Holdings, Inc. (NYSE:SPR)’s earnings results on a trailing basis, it suggests the stock would be a value play if it did hit sell-side targets.
A number of potential buyers, including private equity groups Carlyle and Bain Capital, are reportedly interested in $1.6 billion market cap funds transfer company Moneygram International Inc (NASDAQ:MGI). Funds transfer companies with brick-and-mortar retail locations are somewhat out of favor in the market as investors look towards competition from Paypal and directly from banks. However, Moneygram International Inc (NASDAQ:MGI)’s sales and operating income were up nicely in the first half of 2013 versus a year earlier. Analysts expect growth to continue, and the stock trades at 15 times forward earnings estimates- a considerable premium to Western Union but possibly an attractive price if it can continue to grow its business.
Disclosure: I own no shares of any stocks mentioned in this article.
