• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

These 4 Stocks Are Potential Acquisition Candidates

They're cheap, have lots of cash, and/or have fairly strong brand names.
By JONATHAN HELLER
Apr 23, 2019 | 10:30 AM EDT
Stocks quotes in this article: VRA, FOSL, FIT, BHE

It's been quite a while since we've seen a double net or former double net (company trading between 1 and 2 times net current asset value or NCAV) acquired. Between 2016 and 2017, however, this was very fertile ground for takeovers, and we witnessed several, including West Marine, CDI Corp, RetailMeNot, Ingram Micro, Rofin-Sinar Technologies, Skullcandy and Steel Excel taken out.

If there were any commonalities among these names beyond the fact that they traded at very low multiples of NCAV, it was that they were cheap, had lots of cash, and/or fairly strong brand names. So, once again, I thought it would be an interesting exercise to identify some additional prospects with similar attributes.

Staring with one of the uglier sectors, retail, there are a handful of names that could be in play. The first, Vera Bradley (VRA) , currently trades at 2.12x NCAV, and ended the year with $157 million or $4.50 per share in cash and investments and no debt. The brand may not be as popular as it once was, but there still may be some value there to a bigger fish, and the enterprise value or EV (market cap - cash + debt) is very small at $250 million.

Fossil Group (FOSL) currently trades at 2.42x NCAV. There were some takeover rumors last year, and shares went on a wild ride between late 2017 and 2018, rising from $7 to $31, but the stock has since fallen back to earth at about $13. The company has been "right-sizing", closing stores (one NJ store I visited a few times over the past six months among them), and has halved its debt since 2016. FOSL ended the latest quarter with $403 million, or $8.16 per share in cash, but $396 million in debt, and has an EV of around $630 million. (Note: I don't capitalize operating leases for purposes of the NCAV calculation.)

This next one should come as no surprise, I've mentioned it previously as a takeover candidate - Fitbit (FIT) - which trades at 2.57x NCAV, and has been routinely shunned by the markets post it's brief cult stock status. The company ended its latest quarter with $724 million or $2.89 per share in cash and short-term investments and no debt; current EV is around $650 million. FIT has put up a couple of consecutive positive quarterly earnings surprises, but overall, markets remain skeptical of whether it can ever turn sustained profits. It's hard to argue its brand name status, however.

Finally, a perennial player, which I've held out previously, Benchmark Electronics (BHE) trades at 1.87x NCAV. The company ended its latest quarter with $458 million, or $10.63 per share in cash, and $154 million in debt. Current EV is about $875 million. The company started paying a 15 cent quarterly dividend last year and currently yields 2.2%. I'd have thought that initiating a dividend and thus reducing cash might tend to remove a name from contention, but look no further than West Marine, which somewhat surprisingly initiated a dividend in April, 2017 just two months before its acquisition was announced.

I'm not done yet as there are a handful of other potential candidates - which I will explore in a future column.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jonathan Heller was Long VRA, FIT.

TAGS: Mergers and Acquisitions | Investing | Markets | Stocks | Technical Analysis | Trading

More from Investing

SoFi Technologies Is Primed for a Rebound

Bruce Kamich
May 16, 2022 8:50 AM EDT

Here's where the shares may be headed next.

Don't Worry About Capitulation but Focus on How the Market Wind Is Blowing

Bob Byrne
May 16, 2022 8:17 AM EDT

If you're a short-term trader, try to identify which way the market is trying to auction.

A Weekend Review of Indicators Points the Way to a Tradable Rally

Bruce Kamich
May 16, 2022 7:58 AM EDT

Keep in mind that this is not a buy-and-hold recommendation but rather a path to producing modest gains over the next few weeks.

Worries About a Potential Recession Are Building

James "Rev Shark" DePorre
May 16, 2022 7:39 AM EDT

For now, this is a bear market, and strength cannot be trusted.

Markets, Not So Confident Fed, Stocks Losing Streak, China Economy, My Trades

Stephen Guilfoyle
May 16, 2022 7:18 AM EDT

This week's earnings focus will be on the retailers with rivals such as Walmart and Target, as well as Home Depot and Lowe's reporting.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:14 PM EDT PAUL PRICE

    A New, Very Scary Movie

  • 08:51 AM EDT PAUL PRICE

    Advice From the Future...

  • 12:20 PM EDT PAUL PRICE

    A Blast From the Past Regarding Bitcoin

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login