By Jeff Reeves
What makes Huntsman a buyout candidate instead of just a boring chemicals stock? Well for one, the same industry-wide consolidation that is featured in the first three picks. Dow Chemical /zigman2/quotes/203121064/composite DOW -0.95% and DuPont /zigman2/quotes/203606582/composite DD -0.73% are both about 10 times the size. 3M /zigman2/quotes/205029460/composite MMM -2.13% is almost 17 times the size. There aren't a lot of players out there, and all are much larger than Huntsman.
Furthermore, Huntsman has a history of being a buyout candidate. A troubled history, true, but a history nonetheless.
In 2008, Access Industries and Apollo fought to buy Huntsman. Unfortunately, the big-time fight over a big-time buyout coincided with the financial crisis, so the court fight helped scuttle any takeover plans. But in 2012, rumors of a revived takeover began again in earnest. Bain Capital was reportedly interested . Other suitors may be in the market for Huntsman, too.
That kind of buzz is a decent indicator, even if it's not a sure thing. And if it never comes to pass? Well, you get a 2.8% dividend and a stock that is up 25% in the last 12 months. Not bad.
The small, unprofitable carrier is off more than 30% in the past 12 months and doesn't have much to look forward to beyond a merger deal. But while speculative, an investment in Leap Wireless on the hopes of a different suitor — or even the MetroPCS/T-Mobile deal falling through — still might be worth making.
That's because Leap's biggest asset is wireless spectrum. The carrier known to most consumers through its Cricket brand reaches more than 130 million people in the U.S. Unfortunately, recent reports show that about 30% of its users are outside its operating area, and it only uses about 40% of its network bandwidth inside its geographic constraints.
Since it's very unlikely that Leap will grow dramatically inside its boundaries or build out a bigger network to cover those beyond its current zoning, a well-crafted deal with a larger carrier could make a lot of sense.
A failed 2011 bid for T-Mobile by AT&T means that the big guys aren't going to be likely buyers here. But if AT&T and Verizon are out, why not Sprint /zigman2/quotes/208685669/composite S +5.45% ? Or if the T-Mobile deal crumbles again, why not either it or PCS?
Wireless bandwidth is in demand and the way of the future. Of course, there's a big risk that competitors could just wait for LEAP to bleed itself dry and buy some of the parts ... so tread lightly.
Green Mountain Coffee Roasters
Green Mountain Coffee Roasters made a big splash with its Keurig and K-Cup technology. But now GMCR has stiff competition from Starbucks /zigman2/quotes/207508890/composite SBUX +2.03% and its Verismo, Nestle and its Dolce Gusto line, gadgets from Tassimo and a host of others.
GMCR stock has crashed more than 60% from its 2011 peak of about $116 a share. While Starbucks, long the front-runner, might no longer be eager to buy Green Mountain now that it has launched the Verismo, GMCR still could be a buyout play. The K-Cup technology is pretty ubiquitous, and a company like Nestle could benefit big-time from that kind of distribution.
GMCR certainly is a risky proposition. The stock has lost about 8% in short order since its recent earnings trouble earlier in February. However, some analysts are bullish on the long-term as new strategies come on line .