stock pickers

Our top stock picks seem to attract way more than an average number of takeover bids. We think this is because we zero in on a company’s earnings potential, rather than basing decisions on predictions for next year’s earnings. Corporate buyers and big investors usually see things the same way. Many investors tell us that until they began following our advice, they never had the pleasure of watching a stock they own jump 25% in a few days, due to takeover news. Though we’re used to takeovers, we’ve seen more of our top stock picks attract takeover bids in the past few weeks than at any other time in our history. Here’s a recap:...

You’ve probably heard of Facebook, a “social-networking” site with more than 500 million users worldwide. Facebook was started by a group of Harvard University students in 2004. It then expanded to other schools before it was opened to anyone aged 13 and over.

Facebook: An outstanding way to keep in touch with family and friends

In just six years, Facebook has expanded way past the circle of students who started it. The site now attracts users of all ages. In fact, according to a 2009 study by Washington, D.C.-based iStrategyLabs, the number of Facebook users aged 55 and over jumped 514% in the first six months of 2009. By comparison, Facebook users between 18 and 24 years of age only rose by 5% during that time.

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Adobe Systems Inc. (Nasdaq symbol ADBE) makes software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use Adobe’s software to create print publications and web pages. The company also makes Adobe Flash, which lets web site developers make web pages more interactive by adding animation and video. Computer users can download Adobe’s Flash Player viewer for free. We analyze Adobe in our Stock Pickers Digest and Wall Street Stock Forecaster newsletters....

When you’re looking for high return investments, it pays to be skeptical of companies that rely too heavily on acquisitions. That’s because the buyer of something rarely knows as much about it as the seller. So it follows that if a company makes enough acquisitions, it might eventually buy something that has hidden problems. At some point, those problems will come out into the open and hurt the buyer’s earnings.

How a bad acquisition can cause high return investments to suffer

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MART RESOURCES $0.70 (Toronto symbol MMT; SI Rating: Speculative) (403-270-1841; www.martresources.com; Shares outstanding: 335.5 million; Market cap: $115.8 million; No dividends paid) is focused on developing, producing and drilling for oil at its onshore properties in Africa. Mart is currently producing oil from its 50%-held Umusadege field in Nigeria. Mart recently released preliminary results from its latest well at the field, the UMU-6 well. One section of the well flowed oil at 3,433 barrels per day. Average daily production for the entire Umusadege field was 3,886 barrels per day in latest quarter. Operating in Nigeria exposes the company to considerable political risk. However, further drilling success would continue to steadily increase Mart’s oil production....

Investors often ask how we have managed to recommend so many value stock picks that get taken over for big profits. In fact, some readers of our newsletters and investment services tell us that they never had a stock taken over at a profit until they began following our advice. More on the strategy that helps us routinely spot takeover candidates in a moment. But first, here are just a few recent takeover targets we’ve recommended. All have rewarded our readers with big gains:

• In the October 2010 issue of Wall Street Stock Forecaster, we recommended Del Monte Foods (symbol DLM on New York) at $13 a share. In November, the company accepted a $19.00-a-share takeover offer from a private equity group led by KKR & Co. (symbol KKR on New York). Del Monte is now trading at $18.80. That’s a 45% gain!
• In an October 8, 2010, Stock Pickers Digest Hotline, we issued a “buy” recommendation on DundeeWealth Inc. (symbol DW on Toronto), at $15.11. On November 22, Scotiabank (symbol BNS on Toronto), announced that it will buy the 82% of DundeeWealth that it doesn’t already own. The news caused DundeeWealth’s shares to shoot up to their current $21.22 — for a 40.4% gain!
• And these weren’t our only October recommendations that gained sharply on a takeover. We recommended Verigy Ltd. (symbol VRGY on Nasdaq) in the October issue of Stock Pickers Digest at $8.28. Just last week, Japan-based Advantest, another maker of computer-chip testing equipment, offered to buy Verigy for $12.15 a share. That sent the stock up to its current $13.43, for a gain of 62.2%.

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MAJOR DRILLING, $41.95, symbol MDI on Toronto, jumped 18% this week after the company reported sharply higher results in the latest quarter. In the three months ended October 31, 2010, Major’s revenue jumped 69.2%, to $127.8 million from $75.5 million a year earlier. The company earned $11.4 million, or $0.48 a share, up from $4.1 million, or $0.17 a share. Cash flow was $18.6 million, or $0.78 a share, in the latest quarter. That’s up 51.2%, from $12.3 million, or $0.51 a share. Major expects to see a continued rebound during 2011. Gold prices are at all-time highs, base-metal prices are strong, and many mining companies have raised new funds for exploration....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successfully investing money. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Tip of the week: “Investing money in futures gives you high leverage, but leverage works two ways.” Futures trading provides a perfectly legal way to bet on price changes in commodity, currency and financial markets. When you buy or sell a futures contract, you commit yourself to buy or sell a quantity of a commodity (or currency or financial instrument) in the future. The date and quantity are standard; you fix the price when you buy or sell the contract....

Aéropostale, Inc. (symbol ARO in New York) is a specialty retailer of clothing and accessories. The company mainly targets 14- to 17-year-old women and men. Aeropostale also has 46 “P.S. from Aeropostale” stores, which are aimed at seven-to-12-year-old elementary-school students. The company is one of the aggressive stock investing picks we cover in our Stock Pickers Digest newsletter. Aéropostale has nearly 900 stores located in 49 U.S. states, and 36 in Canada. The company also sells its clothing through its web site, www.aeropostale.com. The company’s low prices are one of the main reasons why it has attracted a devoted customer base in an industry where fashion trends change quickly. In the three months ended October 30, 2010, the company’s overall sales rose 6.1% to $602.8 million from $567.8 million in the same period last year. Same-store sales for the period were essentially flat. Aeropostale earned $58.5 million, or $0.64 a share, down 6.5% from $62.6 million, or $0.62 a share, a year earlier....

BANK OF NOVA SCOTIA, $53.59, Toronto symbol BNS, is buying the 82% of DundeeWealth Inc. (Toronto symbol DW) that it does not already own. DundeeWealth manages investments and operates a brokerage business. The company also owns the Dynamic family of mutual funds, and provides financial-planning and investment advice. DundeeWealth is a recommendation of Stock Pickers Digest, our newsletter for aggressive investing. The deal will double the size of Bank of Nova Scotia’s mutual-fund business, and make it the fifth-largest mutual-fund company in Canada. It gives also gives the bank a number of new growth opportunities: Bank of Nova Scotia will now be able to sell more of its products and services to DundeeWealth’s high-quality clientele. As well, the bank may sell Dynamic funds through its branches in Asia and Latin America. Moreover, by expanding its wealth-management business, Bank of Nova Scotia is putting itself in a position to profit as more baby boomers approach retirement....