Nearly a year after Alphabet (GOOGL) made a $7.35 per share offer for Fitbit (FIT) , it appears as though the deal may go through after all. That's what the market is telling us at least, as FIT shares closed at $6.98 on Thursday, 5% below the offer price. At times, the stock traded at up to a 19% discount to the offer price as there were doubts the deal would obtain regulatory approval here and abroad. But shares rallied 6% on Tuesday on six times normal average volume after GOOGL made new concessions to EU antitrust authorities, who are expected to make a decision by December 23rd.
FIT was a lesson in frustration for this value investor, and I closed the position the day the deal was announced last November 1st. It ended up being a profitable trade, albeit an excruciating ride. I was not in the name until long after the growth luster had worn off, leaving a cash-rich, low price to net current asset value (NCAV) company that was a takeover target. Too bad the takeout price was so low, but beggars can't be choosers.
Elsewhere, in my run-up to unveiling the 2020 Triple Net Active Versus Passive Portfolio, the population of qualifying names continues to gyrate. Just over a week ago, there were 40 qualifiers, two days later there were 36, and as of Friday morning, there are 32. That includes a couple of new candidates:
Electrical wire and cable name Encore Wire (WIRE) trades at 2.17x NCAV and 15x next year's consensus earnings estimate. WIRE ended its latest quarter with $250 million or just over $12 per share in cash and no debt. I've encountered WIRE previously. Back in early March it appeared in my Ben Graham-inspired "Stocks for the Defensive Investor" screen.
Another newbie, Aerospace and defense name AAR Corp (AIR) which trades at 2.64x NCAV, and about 10.5x next year's consensus earnings estimate. AAR ended its latest quarter with $108 million, or about $3 per share in cash, and $255 million in debt. The company put up better than expected first quarter results last week, earning 17 cents versus the 5-cent loss consensus.
Given Friday's news that President Trump has Covid, the fact that markets will likely open down, and with employment numbers coming out today, it could be a very rocky ride in the markets, and more triple-nets may be shaken from the tree.
(Alphabet is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells GOOGL? Learn more now.)
