Needles in Haystacks

 | Sep 12, 2011 | 3:56 PM EDT
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Needles in haystacks? That's how you have to look at Broadcom's (BRCM) monster bid for NetLogic Microsytems (NETL) this morning in order to solidify its product line for cell phone makers including Apple (AAPL). Broadcom is willing to pay a huge premium -- NetLogic soared $16 points off a $32 basis -- because it wanted a friendly deal and it got one.

It's similar to when Google (GOOG) paid up gigantically for Motorola Mobility (MMI), again to get a friendly deal. Or when Texas Instruments (TXN) was willing to pay up more than $10 for National Semiconductor (NSM) when it was at $14. And it reminds me of Intel's (INTC) astoundingly high bid for McAfee (MFE), the tech security firm, to get that one on a friendly basis.

Here's the problem. That's all it reminds me of. You are talking about four stocks that got premium bids. Just four stocks. There are literally hundreds of others in tech land that haven't gotten bids that probably won't get bids.

There was a time when I used to think about all the ways to win in this market, but right now there just aren't a lot of ways to win. In fact, you have to keep from getting too excited -- hence what I call the curb your enthusiasm" market -- for this market.

Sure, away from tech we've had some big deals, but even they have turned out to be problematic. Will AT&T (T) get T-Mobile? I don't think so in this politically charged environment. As much as I like Express Scripts (ESRX) and its combination with Medco Health Solutions (MHS), I seriously doubt the government will let that deal go through.

We have had hardly any bank deals. We haven't had a lot of food deals. We used to get a lot of drug deals. Not that many these days, even as there was a plethora last year. Retail? Nothing. Cyclicals? Other than Caterpillar (CAT) buying Bucyrus (BUCY) not much at all.

So, rather than say, look, there's a lot of ways to win, I think we have to conclude that you better be buying stocks on earnings because it is not likely you will get a stock that has gone down so much that it will get a bid. Don't be teased. Don't reach for a target. Stick with companies with good dividends and good earnings prospects -- those are like good running backs that just chew up yardage. And don't reach for the long ball.

In this environment, it's just as likely you'll be picked off with nothing to show for it. 

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