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MARKET ROUNDUP
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 Dow:Merger Monday. I remember hearing that term all the time in the 1990s. It seemed like every first day of the week, you’d wake up to news of another multi-million — or multi-billion — dollar deal!
Well, those days are back — and the deals are bigger than ever. We just learned that Medtronic (Weiss Ratings: MDT, A) is buying Covidien (Weiss Ratings: COV, B+) for a whopping $42.9 billion, or roughly $93.22 a share. That’s a 29 percent premium to where Covidien was trading at the end of last week.
The move will bulk up the second-largest maker of medical devices. But the deal also gives Minneapolis-based Medtronic the Irish address and domicile of Covidien, allowing the firm to avoid U.S. taxes when investing billions of dollars in cash the combined firm will have on its balance sheet.
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“As an investor, you can make a nice pile of money by being in the right stocks on any given Monday morning.” |
I told you in mid-May that many U.S. firms are seeking overseas deals for tax reasons. I also wrote last week about how some legislators are trying to incentivize corporations to repatriate their overseas cash hoards. My sense is that we’re going to see a critical mass of deals that eventually forces Congress’ hands, especially as the price tags for these transactions spirals ever higher.
Speaking of deals, Medtronic-Covidien was far from the only one we just learned about. Williams Partners LP (Weiss Ratings: WPZ, C+) is also buying a 50 percent stake in Access Midstream Partners LP (Weiss Ratings: ACMP, B) as part of a $6 billion energy sector merger.
The deal will increase Williams’ heft in the business of transporting and storing oil, gas, and related energy products. You probably recall that I’ve been very bullish on the domestic energy industry, and the energy transportation sector in particular. If we see deal activity ramp up, it’ll only add upside pressure on these kinds of stocks.
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| Corporations are taking advantage of rock-bottom interest rates and excessively easy corporate lending standards to go on a buying spree. |
Even the technology sector is getting into the game. Chipmaker SanDisk (Weiss Ratings: SNDK, A-) is buying Fusion-io (Weiss Ratings: FIO, D+) for $1.1 billion, or $11.25 a share. That will increase its exposure to the flash storage chip business.
Plus, Level 3 Communications (Weiss Ratings: LVLT, C) is buying TW Telecom (Weiss Ratings: TWTC, C) for around $5.6 billion, or $40.86 a share. The firms both provide voice, data, and Internet access services, allowing Level 3 to bulk up through the transaction.
Bottom line? “Deal Fever” is sweeping through multiple industries in the U.S.
Corporations are taking advantage of rock-bottom interest rates and excessively easy corporate lending standards to go on a buying spree, while private equity firms who bought companies on the cheap in the past few years are looking to cash out.
As an investor, you can make a nice pile of money by being in the right stocks on any given Monday morning. My favorite strategy is to focus on industries like health care, domestic energy, aerospace and the like that are swept up in their own sector bull markets.
Then I like to find the best stocks in those sectors using the Weiss Ratings, and my own personal analysis — and fire off buy recommendations like those in my new special report “Six Mega Market Winners for 2014 — and Beyond.” That way, you’re in a good position to make money from strong underlying trends. And if one of your stocks happens to catch a bid? Well, that’s just “gravy” on top!
So what’s your favorite strategy to profit from the boom in mergers and acquisitions? Are there particular sectors that you think are going to see more M&A than others? Or less? Have you ever woken up on Monday morning to a big spike in the price of one of your stocks? Share your experiences and insight right here.
| OUR READERS SPEAK |
The chaos in Iraq inspired many of you to weigh in on the causes and consequences of the latest Middle East tension.
Reader Walter S.said: “We had no business in Iraq to begin with under Presidents Bush senior and his son. We need to chalk up all the investments as bad investment and write off the losses to poor judgments.
“The world political-economic scene is changing rapidly from the British and French meddling in the Middle East during and after World War I. They rewrote the old map, splitting people into disagreeable factions, like Iraq, that have eventually exploded into the turmoil we now have.”
Reader K. O’C. agreed, suggesting that any attempt at further nation-building will likely fail. The comments:
“Why did the U.S. ever think they could implement a democratic style of government in Iraq to begin with? It is totally foreign to them and they would revert back to what they’re accustomed to as soon as the U.S. troops left, which is exactly what has happened. They need to re-establish their own form of government, and if that involves a civil war, then so be it.”
Meanwhile, Reader Norman raised the prospect of a broadening of the conflict should Iran get deeper enmeshed in the Iraqi turmoil. His comments:
“The media have noted the issue with Iraq oil if the ISIS takes over Iraq. And they have noted that Iran is sending troops to help. What was missed is what would happen if Iran sends enough troops to take over Iraq itself.
“Saudi Arabia would not be too happy having Iran as a direct neighbor. If Iran is occupying Iraq, it would be an easy step for it to occupy Syria as well. Israel would not be too happy either if Iran were a direct neighbor. Food for thought.”
It’s impossible to say how these fast-moving events will shake out. But if you have any insights to share … as well as thoughts on their investment implications … definitely hop over to the comment section to post them!
| OTHER DEVELOPMENTS OF THE DAY |
 Today’s economic data dump included readings on industrial production (+0.6 percent in May, better than the 0.5 percent average forecast from economists polled by Briefing.com) … the Empire Manufacturing Index (19.3, better than the 12.8 forecast) … and the National Association of Home Builders housing market index (49, better than the 46 forecast).
Reminder: You can let me know what you think by putting your comments here.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 19 comments }
One of our greatest blunders ever. After we trashed Iraq and got rid of Saddam two of the most likely outcomes were an on going civil war in Iraq and/or Iraq becoming an ally or a puppet of our great enemy, Iran.
I totally disagree with Walter S. and his comments on Bush Sr. We had every right to stop Iraq’s aggression on harmless little Kuwait. Where Bush Sr. failed was in not following the Iraqis all the way to Bagdag and taking Sadam out then and there. He had a perfectly good reason to escalate the conflict because “all bets were off” when the Iraqis torched the Kuwaiti oil fields.
It was obvious to me that we should never have taken out our complete military after making so much progress in Iraq. Our policy has always been to leave soldiers there to keep the peace even as we draw down.
Why can’t those terrorists be dealt with from the air as they move along prior to their entry into Baghdad?
Mike, thank you for your article on recent mergers and the Medtronic/Covidien merger–very interesting.
Could you please clarify some comments that you made in the article. You wrote, “But the deal also gives Minneapolis-based Medtronic the Irish address and domicile of Covidien, allowing the firm to avoid U.S. taxes when investing billions of dollars in cash the combined firm will have on its balance sheet.”
I don’t know exactly how corporate taxes work for international companies but I would imagine that the IRS requires a corporation that receives revenue in USD to pay taxes on that revenue in the U.S., and not mix it with international revenue. Is this not true?
On the other hand, if the newly merged company is allowed to convert USD revenue into Euros, won’t they have to pay taxes on that immediately–which would create some significant tax liabilities? Also, if the new company tries to convert USD to Euro, wouldn’t that mean that the company would subject itself to exchange-rate risk? (If the merger was for tax purposes then it is a long-term decision, and in the long-term the Euro is not looking too good.) Do you not think that long-term, possible devaluation of the Euro (or even its destruction) could destroy any potential tax benefits received from an exchange?
Based on all of this, it would seem that Medtronic is expecting to get a significant return on its investment relatively quickly, and is not looking at the long-term as a factor of this decision.
If you have the time, I’d appreciate your thoughts on this.
Thanks,
-David
To clarify the situation The Republic of Ireland is a free country, it taxes corporations at levels which allow continued growth ie. 15%. USA has become a fascist dictatorship run by executive orders of a Hitler clone & demented puppet & Rockerfeller/Rothschild owned United Nations via IMF, World Bank, Credit Suisse, & Bank of international settlements Federal fractional reserve banks, including the banks of England, the ECB & many other’s New World Order plan is to disarm and destabilise independent countries. If you follow global UN intervention since they dumped the LON. UN always throws it’s armed forces against government forces, elected or not. It supports only Tyrants never has it sided with a sane countries government. George Bush Senior sent his secretary of State to Iraq, he told Sadam Hussain, the USA would not interfere if he was to reclaim his own former territory (now Kuwait by British decree). Then attacked his former ally for acting on his advice. The USA used exactly the same tactic in South Africa, the CIA approached PW Botha, RSA minister of defense, & promised to tell the truth of a British, Swedish, Australian plot ti isolate South Africa. If South Africa would liberate US/Dutch oil wells in Angola. Which it did. When troops reached the capital US was contacted to make the announcement it failed to materialize so the troops were recalled and the 4 USSR/Cuban ships laden with troops and equipment were able to dock and overun Angola. THIS IS AN ORCHESTRATED EVENT. On the 1st of July you’ll see the USD collapse against most currencies. Another planned event.
Yeah! I woke up to a “spike”on this very day, as a matter of fact! I’ve been playing catch-up on WPZ for over a year and their acquisition of a stake in ACMP has almost done it for me! It wasn’t what I did, but what they did. All I did was wait patiently for them to do SOMETHING to perk up their stock price, and they did! I hope they can go up from here.
Please in subscribe me
I note K.O’C’s comment about how the Iraqi don’t understand democracy. Their leaders may not want democracy and a loss of power, but I don’t agree that democracy is not understood. In Iraq and other cultures, when given a chance to vote, and despite threats of violence and repercussions, 70-90% of the people turn to vote in their elections. You have all seen the news videos of people showing off their purple thumbs, verifying that they have voted, and happy and proud to have voted. They may not feel safe to try to assert individual rights in that war-torn country, but that does not mean they don’t understand or even desire democracy.
THE WEISS RATINGS WILL APPARENTLY ONLY REPORT TO ME ABOUT RATING
CHANGES ON 10 SELECTED COMPANIES. THIS DOES NOT ALLOW ME TO CHECK
THE RATING OF A COMPANY I MIGHT CONSIDER BUYING STOCK IN. AM I MISSING
SOMETHING HERE OR IS YOUR HIGHLY TOUTED SERVICE THAT LIMITED???????????
3,000 + YEARS OF TYRANNY in the MIDDLE EAST & democracy is secretly whispered it is as nebulous as TERM LIMITS in the USA what a great idea for the deaf .DOES ANYBODY even CARE? A SIGNIFICANT change to WASHINGTON politics///WOW///
We are in Iraq because the British Secret Service so decreed it. The Bushes, Clintons, and Obama are all devotees of the plans laid out by the first of the SS groups, the Americans because they are all followers of Atlantic Union, a cover group for the British Empire being the prototype for the New World Order.
Most Americans today just do not know history. They do not know that Islam has been competing with all religions sinnce its inception but nevertheless has attracted a huge group of devotees in high places, particularly in The British Empire secret service and the American one created after WWII….the CIA. The 19th Century gave us many examples of that fascination and the 20th Century, the tales of Lawrence of Arabia, the stories of the Arabian Nights et al and especially Lowell Thomas, the biographer of Lawrence and Sir George Obrien, the doyen of the Brit Secret Service and the Foreign Office. These men were open adherents of Islam, its popular sides!
Recent revelations re leaders of the CIA and NSA who are Islamic converts do not seem to have permeated the public consciousness; That omission is a mistake and we will pay dearly for it! It is the reason Mme Clinton surrpunded herself with Islamic supporters and has profitted grandly from it, her whole family has.
We are the leaders of the world because the same groups engineered the petro dollar for the Saudis, the Keepers of the Islamic Holy Places. That dollar is what has made us the police of the world, managing the oil for the Saudis and their allies at the same time that same group closed all our US oil independenets. The Bushes were all involved in that! That Petro dollar has taken our currency and the mess we are in now re our markets, investments, even our land deeds all stem from that invention. The NY FED was its operative from the start.
Islam plays chess very well. They have had their adherents placed in high offices in all international groups. Its last caper, making one of them the President of the United States, was fantastic, from buying injunctions in every state against revelations of any info re Obama even before he was introduced as a candidate by Oprah Winfrey!
We are about to be taken over by Islam and none of you even mention that fact. We have no military left but we have paid giovernment agents now in control….Who are they paid by?
It is classic. We are drawn into a web of deceit, all our institutions have been decimated and you all are wondering still what is happening!
What fools you are!
I have been in Saudi, known loads of Brit SS and CIA and NSA too. I still travel the world and I marvel at the stupidity of fellow Americans who cannot see the facts even when shown them first hand! Country after country has been taken by Islam, the classic was India which in less five years of its independence was in five parts, 4 of them Islamic! This was noit done by India but by the British Raj…..that was the popular name for the British SS…Kipling gave it to us in his tales!
In our times, USSR was brought down not by Reagan or the USA but because most of its soviet republics followed Islam and they were all aided by the Brit SS in their endeaviors, carrying on the tradition told us all by Kipling too. The latest re Ukraine is really the best. The USA sent in the “contractors” and guess what, the Ukraine will have no energy….What Islam really wants is that famous bread basket of Europe and it is being handed it even while you wonder what is happening!
Oh well, you are all devotees of the stock exchanges, the invention brought to the West by the Turkish coffee houses just four centuries ago.
You see islam works long before it strikes!
Alice Maxwell, aged 90.
I am new to the stock market, and what are the cheaptest stock to invest in 2014.
It appears to me that the Sunni Kurds are co-operating with ISIS to bring about a new state in the North Part of Iraq, with the help of the Sunni’s on the Syria Border side.
The Iraqis in the South are Shia.
A US spokesman suggested that if this were to become a real possibility, the US would send in Ground troops(Go to War), The US has already sent in 275 of a contingency force of 500 US troops from a troop ship near Iraq.
The US is already bombing northern Iraq.
From the European side, it appears that a minimum wage or increase in minimum wage is going to go ahead, in an attempt to prevent deflation. It will fail, too little too late.
Further it appears Europe will export gas it receives from Russia to Ukraine, during the Summer Months, but come fall all, bets are off.
One of Weiss Writers who lives in Thailand, talked about the increase in the War Cycles, but I could not translate that phrase.
Now I think I can, it means that People are getting to the point that they no longer care. This I predicted a few years ago. This is why I keep repeating that we passed the point of no return, some time ago.
As long as American has a weak novice for president we will be challenged in every corner of the globe. The United States did not ask to inherit the role as the leader of the free world from the British at the end of WWII. It just happened. We can not abrogate our responsibilities but those responsibilities do not necessarily include military intervention in every conflict. A solid believable American foreign policy is crucial to world stability.
We have a weak inexperienced ideologue for president. The American people can not blame Obama. He is just doing what he said he would do. The blame rests on the shoulders of every American who voted for him.
It is hard to escape the politically incorrect reality. If you voted for Obama you are an enemy of the United States of America either wittingly our unwittingly. You either knew what you were doing when you marked your ballot or you were duped.
Tom
Partition into Kurdish, Shite, and Sunni regions is the ONLY answer.
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mr.saber elfaidy is top millionaire soceity
The United States must refrain from trying to solve all the other countries’ problems.
Why not let the Sunni’s, the Shiite’s and the ISIS killers fight it out among themselves in Iraq? They have been at odds for thousands of years and that situation is not about to change. The more they kill off each other the less threat they will be to the United States and to the rest of the world. Haven’t we lost enough lives and resources in the Muslim world where they will never accept democracy? They have never had democracy or freedom and they don’t want either. This part of the world is far different from the way the Japanese and Germans where after World War II, as their people were wise enough to want stability, freedom and were willing to reform. They were not hung up on a certain religion or ideology.
I seldom agree with this President on anything however, he just may be right in not getting this country bogged down once again after he, in my opinion, made such a bad decision when he pulled out all our fighting forces from IRAQ, without any status of forces agreement after we had invested so much in that country.
I contend that invading Iraq in the first place was a horrible mistake by G.W. Bush. Hussein was no doubt a killer and a tyrant but he did act as a buffer between the U.S and IRAN. Also, 4,400 American lives lost and many thousands more severely injured was too high a price to pay just to oust a Dictator. That’s not even counting the trillions in we squandered just to over throw Hussein.
The current President and his predecessor G.W. Bush have done more to destroy our countries’ financial future and the future for our kids and grand kids than all the rest of the preceding Presidents combined.
The voters of this country had better get informed and get their heads screwed on right for we will not get many more chances, if any, to pick the right President to head our country. He of She must be qualified with previous experience of having actually accomplished something. They preferably would have governed a State or commanded an Army, Navy or Air Force. Slick talk and B.S. are cheap and the public must be able to distinguish between the two when choosing a President. The elite with big PAC, money had better let the voters pick the candidates this time since in the final election their votes are needed to elect a President. Big money does not always work.
Wake up America it may already be too late!!!!
The United States should get completely out of Iraq unless our Congress declares war on the entire Muslim world and we stop for nothing less than unconditional surrender. These conflicts that we have been engaging in for decades accomplish nothing except to bankruptcy our nation. Why should we be in Iraq expending our manpower and resources to prop up Al-Malike’s Sheiite empire to aid the Iranians. Makes no sense at al