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The return of major deal making in 2013 could deliver huge profits to investors who know the right stocks to buy now.
After the financial crisis, deal making – once quite common a decade ago – came to a near halt. But corporate mergers, takeovers and LBOs started heating up at the end of last year.
The last three months of 2012 saw the highest three-month deal totals and highest deal spending in the past two years, with the year ending on a high note.
According to FactSet Research Systems Inc., “U.S. M&A activity went up in December, increasing by 20.2% with 918 announcements compared to 764 in November, the second largest increase in 2012.”
The trend is expected to accelerate further this year.
Standard & Poor’s predicts a whopping $1 trillion in mergers will be announced in 2013. That would be an 11% increase over last year and would mark the first time mergers would hit the $1 trillion mark since the Great Recession.
LBO volume is also expected to trend higher this year. LBO volume dipped in 2012 to $98 billion, down from $111 billion in 2011.
In fact, Dell Inc.’s (Nasdaq: DELL) announcement Tuesday that it agreed to a leveraged buyout (LBO) with Silver Lake Partners stoked plenty of talk about the best stocks to buy ahead of increased M&A activity in 2013.
Dell’s $24.4 billion LBO wasn’t the only activity fueling 2013 deal talks.
Also announced was a $16 billion deal between John Malone’s Liberty Global (Nasdaq: LBYTA) and U.K. television and Internet provider Virgin Media (Nasdaq: VMED). In addition, rumors swirled Tuesday that Hewlett-Packard Co. (NYSE: HPQ) is considering breaking up the company.
What’s Fueling the Deal Making?
Several factors are behind the robust wheeling and dealing expected in the months ahead.
“It’s not just money coming into the market and money idling at deal hungry investment shops that’s going to stimulate mergers, acquisitions, spin-offs and public offerings,” said Money Morning Capital Wave Strategist Shah Gilani. “There are trillions of dollars of cash just sitting on the sidelines looking for a deal. That means deal action-of all kinds-is about to get white hot.”
Thanks to strong broad-based gains in equity markets, sellers have more bargaining room to negotiate for a higher bid as their share prices have risen.
Every industry will be looking to make deals this year, according to Gilani, adding that all the deal making will propel markets to new highs.
“With the power of deals to lift equity markets, it’s not a matter of when we break above the old 2007 market highs, but how high they will go,” he added.
You Can Find the Best Stocks to Buy Ahead of These Monster Deals
So how do investors spot the best stocks to buy so they can profit from this frenzy of deals?
The real money makers, the ones that will give investors gains that will far outpace average market returns, are usually only privy to a select group on Wall Street.
As Gilani explains in a new report, the best way to find the most profitable stocks to buy in this environment means to think like the Wall Street dealmakers themselves.
If you do, you can get a bigger chunk of the profits – which in previous deals have outgained the market nearly 40 to 1.
Gilani describes the ins and outs of the profitable world of Wall Street dealmaking and delivers six more opportunities that are “white hot” right now in this new free report.
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