The New Deal

With elections just a week away, this could easily be a political themed blog. But I am actually referring to deals in the stock market.

I have often commented on how I think that MFI stocks flourish in times of M&A as they are generally value-based stocks that can be accretive to other companies.

But now it goes (in my opinion) a step further, Bankers are flush with cheap cash, but unsure what to do with it all. Also, investors are looking everywhere for yields to beat treasuries. It seems clear to me that we are about to embark on a wave of leveraged buyouts, taking public companies private as debt holders require a much lower return than stock holders.

The wave is already beginning, with STX being rumored (Seagate: Rotten Results Spur Downgrades; But Focus On LBO). Actually, it is funny but apparently Barron's wrote about my theme a week ago (Return of the LBO ). And even more ironically, here is their list of companies they felt would make good LBO candidtaes (my ranking in parenthesis):

• ebay (693)
  
• dell (154)
  
• whr (557)
  
• stx (91)
  
• wdc (104)
  
• gps (144)
  
• yhoo (1686)
  
• fis (810)
  
• aro (53)
  
• gme (80)
  
• csc (590)
  
• swy (1514)
  

They are have strong cash flow. I would argue that you could expand this list easily to many, many strong MFI companies on my top 200 list. This alone may be a reason to move a bit away from foreign MFI stocks to more US-centric. Looking at the list above, I'd probably lean towards ARO as a potential choice.