We talk every day about Greece and how hostage we are to this nation of 11 million people, which will no doubt be many million fewer if it defaults because of mass emigration elsewhere. But we don't talk enough about the positive, which is that it keeps the Federal Reserve on hold. And on the eve of a big Fed meeting today we rally because of worries about a cataclysm when Greece defaults. So thanks Greece for giving us an up day.
I am going to use this respite day to dream dreams of takeovers. Why? Because when I see every single health maintenance company, Cigna (CI), Aetna (AET), UnitedHealth (UNH), Anthem (ANTM) and Humana (HUM) in talks with each other, it seems logical to bless pretty much anything happening in the merger arena.
Given that the market loves pretty much any transaction, witness that dog of a stock Coty (COTY) going up gigantically on what may be a colossal overpay for a bunch of old Procter & Gamble (PG) brands, I think it is safe to say we are now in a market where CEOs know that the best thing they can do is go buy another company. If Coty might be willing to pay $12 billion for Wella and a bunch of other tired hair care brands and rally 20%, if every HMO can rally greatly on the thought that they buy out the other companies, it makes perfect sense to put out some dream merger ideas that I think would drive the stocks of both parties much higher.
Let's start with the mea culpa stock of 2015, Twitter (TWTR). I say mea culpa because my charitable trust, Action Alerts PLUS, owns it and I regret that it does because the trust is way down on the position and I fear that without a takeover or a sense that the company's off course -- something I didn't get when the interim CEO spoke last week on CNBC -- then this stock is going lower. It will go lower not because I am bad-mouthing it. Big deal. It will go lower because it is too expensive on an earnings basis.
However, it is not too expensive on a takeover basis. It is worth a terrific amount to the right buyer and the right buyer is Google (GOOGL). Why Google? First of all because Google's stock can't get out of its own way. Did you notice that after years of outperformance Google's stock has become a stinker? It hasn't moved up since December 2013. That's a long time ago. The S&P 500 has gone from 1818 to 2091 in that period. The Dow has gone from 15,875 to 17,872. Yep, Google's stock's just awful.
I think its stock could go up huge if it bought Twitter for a 20% to even 25% premium. Here's why. First, it could fire everyone. And I mean everyone. It has amazing engineers and a terrific salesforce. Twitter could immediately be integrated into its organization. I had felt that either Twitter would reform its wayward ways -- meaning pick a new CEO with direction who isn't weary or from the same product-driven direction as Dick Costolo -- but right now that doesn't look like it is going to happen. Isn't it amazing that literally you could buy a company and fire everyone and do better? That's Google for Twitter.
Now I always say that you shouldn't recommend a stock if the fundamentals aren't that attractive and that's Twitter. But let me tell you how the Google bid comes about. There is a clearly a vacuum at the top of Twitter. So what's to keep Carl Icahn from taking a stake in Twitter and saying this one has to sell itself? I think he could actually make it happen.
OK, another company that makes too much sense not to be acquired: Yahoo! (YHOO). You subtract all of the stuff it owns -- Yahoo Japan, Alibaba (BABA) shares, and you get zero. So why, if you are Verizon (VZ), do you stop at buying AOL (AOL)? Just go pay $50 and buy Yahoo! You get your money back almost instantly and you become a real Internet player. Remember, Yahoo! will be valued at zero. How can Verizon not want to put Yahoo and AOL under the same roof? This one could actually be a needle mover when combined with AOL.
AT&T (T) should buy Yahoo! to keep up with Verizon. You buy something for a small premium to free and you have a winner.
It's time for Qualcomm (QCOM) to buy Skyworks Solutions (SWKS). CEO David Aldrich has done a remarkable job turning the $20 billion Skyworks into the best cellphone parts company there is. The stock of Skyworks, which is up 46%, has been red hot. The stock of Qualcomm, currently valued at $100 billion, is down 11% because it is pegged as being momentum-less because of a variety of snafus. But it's got a ton of money doing nothing. Qualcomm's stock soars on this deal.
Coca-Cola (KO) should buy Monster Beverage (MNST). Coke's stock has been terrible. It's down 5% for the year. Monster's up 20% but I think it is about to soar because it is now using Coke's distribution system. Coke just closed on the 16.7% acquisition of Monster's stock. It should just go buy the rest. The market would love this.
Kevin Plank just solidified his ownership position of Under Armour (UA) with a new class of stock. Time to buy lululemon (LULU) for $83, the price it was back two years ago to the day. Sure both LULU and UA are up 20% for the year but UA's been stalled a bit and everyone would love the combined company because it would be a juggernaut that can take on Nike (NKE). Why not? Lulu just had its first real good quarter. Plank would crush it in both men's and women's athletic and yoga clothes. Their stocks would both go much higher.
Hilton (HLT) should buy Starwood Hotels & Resorts (HOT). Hilton's up 8%, Starwood's doing nothing even with today's announcement of the time-share spinoff. Starwood has an interim CEO, Adam Aron. He's been at it for a while. Hilton needs growth, Starwood needs growth. Hilton gets instant growth and its stock soars.
The stock of Kellogg (K) has done nothing. That's because it has very few products that the millennials like. It's dying on the vine. It needs to buy both WhiteWave Foods (WWAV) and Hain Celestial (HAIN). That's right. Both. You buy just one it doesn't move the needle. You buy them both and you have the fastest-growing food company in the industry. This one is such a ridiculous no brainer it drives me crazy that it hasn't happened yet. They should do it before Nestle does it. Or Danone. Or Mondelez (MDLZ). The latter would be especially great because then Mondelez can change its name to WhiteWave or Hain. Anything's better than Mondelez. Please!
Apple (AAPL) should by Harman (HAR). Right now, Apple's trying to get into the connected car with CarPlay. Harman's already in the cars. I wanted Apple to buy Netflix (NFLX) to own the living room but I think that's too late. Netflix has moved too much. For $12 billion Apple could buy Harman for $180, a nice premium over the current $121 price and it would own the car. Car's as good as the home.
Finally, Johnson & Johnson (JNJ) should buy Bristol-Myers (BMY). Why not? JNJ has so many good franchises but it can't rally to save its life. It's down almost 6% for the year. Bristol's up 11% for the year and it has a fantastic cancer franchise, which could really dovetail nicely with JNJ's business. Obviously JNJ, which is a $272 billion company, could fire everyone at the $109 billion BMY except the scientists and JNJ, which is at $98, opens at $120 the next day.
Far-fetched? Just the opposite. All of these would produce higher prices for the acquirers. How do I know this? Because this is what I do, try to figure out how stocks can go higher.
It's not idle. The CEOs of every single one of these companies save Apple, which doesn't need to do anything, know these are right to do. Go do them. Go make us some money.
