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Palm Gets Lift From HP
Posted On Wednesday, April 28, 2010 at at 4:54 PM by Finance Fanatic
Following Wednesday close, Hewlett-Packard announced that they will be acquiring the smartphone for $1.2 billion. This is roughly a 28% premium to their current stock price. As a result, Palm has leaped in after hours, currently being up over 23%. These are definitely things to keep an eye out for in 2010. I expect to see a lot of consolidation and buyouts this coming year, which can lead to some very profitable returns. Right now, certain big businesses are finding strong revenues at this point in the economy. However, other smaller companies are still fighting just to stay alive. This large gap between the two is a perfect environment for some both non hostile and hostile take overs. The goal is to find the companies that are prime for picking.
Palm is a perfect fit of the "ideal buyout candidate." They are a smaller company that has dominated market share in the past and has been dwindling since. They have great brand recognition and still a pretty solid retention rate. However, they're growth has been struggling for years as has their stock price and newly entered smart phone players like Apple, Microsoft, and Google are quickly gobbling up market share. This is a perfect scenario for takeover. So keep a look out for stocks (probably under $15), who currently hold a lot of liabilities, and holds a well known name brand that seems to have disappeared the past few years. The NASDAQ will be full of them so keep your eye out.
Financials rebounded rather strongly today, which help my "straddle" position bode well for today. Much of the cause behind the strength was more Fed reassurance that interest rates are not going anywhere anytime soon. Of course many people initially applaud these announcements, hence the jump in financials today. However, when you consider the cause for the 0% rates extension, it does not reflect well on the economic recovery. The Fed will only keep interest rates this low if they feel that by not doing so, the economy would respond very poorly. So in Layman's terms, No interest rates : No economic sustainability.
This week is the markets big chance to make a run before heading back into unemployment week, which is always a nervous week for investors. With the partial rebound in today's trading, much of Tuesday's downside momentum has been neutralized for the time being, unless bears can weasel their way in tomorrow and set up for a selling Friday. I cashed out of my positions today and will most likely hold tight until mid morning to see what the charts are saying. Happy Trading.
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