The problem, of course, is that if manufacturers can’t borrow to buy from suppliers, and wholesalers can’t borrow to buy from manufacturers, and retailers can’t borrow to buy from wholesalers, then consumers can’t get auto loans, credit cards, and mortgages.

The economy faces a serious headwind.

The companies in the toughest position, however, are those that are highly leveraged. Even though interest rates have fallen substantially, they aren’t able to access the credit markets (at reasonable rates) or increase their bank lines to get the liquidity they need.

And therein lies an enormous opportunity for investors like you and me – profiting from corporate takeovers.

Corporate Takeovers – Solid Companies vs. Weak Competition

Companies that have solid balance sheets and high levels of cash are now in a position to scoop up their weakened competitors through corporate takeovers. That allows them to purchase assets on the cheap and potentially increase their profit margins – by eliminating the competition – at the same time.

Let me give you a few examples.

• In the U.S. recently, drug giants Merck (NYSE:MRK) and Pfizer (NYSE:PFE) have unveiled deals to buy Wyeth (NYSE:WYE) and Shcering-Plough (NYSE:SGP), respectively.
• Chinese companies, backed by the dollar-flush Chinese government, have been on a shopping spree lately. Already this year, Chinese firms have announced more than 300 takeovers totaling nearly $68 billion.
• In the pharmaceutical industry, there is plenty of fair game. Many small biotechs, for example, are running out of capital. This dovetails nicely with Big Pharma’s shrinking drug pipelines.
• The gaming industry, too, is hurting bad. For instance, credit downgrades and potential bankruptcy hang over companies like MGM Mirage (NYSE:MGM) and Harrah’s. But Penn National (NASDAQ:PENN) is in a fine position to buy them or other weakened competitors.
• Look at the oil equipment leasing industry. Nabor Industries (NYSE:NBR) carries $4 billion in debt. (Earlier this year it had to pay 9.25% to raise $1.1 billion.)
• But Patterson UTI Energy (NASDAQ:PTEN) is laughing all the way to the bank. Its sound financial condition – and zero debt – are allowing it to invest millions in new equipment.

When the price of oil rebounds who will be in the best position to prosper? Clearly, it’s Patterson. That forces Nabor to at least consider the idea of putting itself up for sale.

This same corporate takeover scenario is playing out in multiple industries in markets all over the world.

How Many Potential Corporate Takeover Candidates Are In Your Portfolio?

Yet when I ask investors how many potential corporate takeover candidates they have in their portfolio, more often than not they simply shrug their shoulders and say “none.”

That’s unfortunate. Investor’s Business Daily recently reported a survey of institutional investors conducted by Boston Consulting. Over 80% of them agree that the current market represents a “once in a lifetime” opportunity for corporate takeovers.

My advice? Don’t rest on your laurels. Buy a handful of potential corporate takeover targets now – before all the new deals starting popping.

Good investing,

Alexander Green

Source: Corporate Takeovers: ‘Once in a Lifetime’ Investment Opportunities

NEW HIGHS OF NOTE LAST WEEK

Halliburton (HAL)… oil services
Patterson-UTI (PTEN)… oil services
Carbo Ceramics (CRR)… oil services
Atwood Oceanics (ATW)… oil services
Key Energy Services (KEG)… oil services
National Oilwell Varco (NOV)… oil services
Spectra Energy (SE)… gas pipelines
U.S. Steel (X)… you guessed it
Schnitzer Steel (SCHN)… scrap steel
Fluor (FLR)… infrastructure
Quanta Services (PWR)… infrastructure
Crude oil, Natural gas, Gasoline, Corn, Soybeans, Cocoa

NEW LOWS OF NOTE LAST WEEK

JetBlue (JBLU)… airline
US Airways (LCC)… airline
Continental Airline (CAL)… airline
MGM Mirage (MGM)… casinos
Boyd Gaming (BYD)… casinos
Wynn Resorts (WYNN)… casinos
Las Vegas Sands (LVS)… casinos
Monarch Casinos (MCRI)… casinos
Winnebago (WGO)… RVs
Thor Industries (THO)… RVs
Fleetwood Enterprises (FLE)… RVs
Goodyear Tire (GT)… tires
News Corp (NWS)… media
Hershey (HSY)… candy
Playboy (PLA)… eye candy
American Express (AXP)… credit cards
Capital One Financial (COF)… credit cards
International Gaming (IGT)… gambling machines
Circuit City (CC)… landfill stuffing continues to suffer
Veolia Environnement (VE)… world’s largest water stock
Honeywell (HON)… conglomerate
General Electric (GE)… conglomerate
United Technologies (UTX)… conglomerate
XM Satellite Radio (XMSR)… satellite radio
Legg Mason (LM)… asset management
Callaway Golf (ELY)… golf equipment
Whole Foods (WFMI)… expensive groceries
General Motors (GM)… read the letter from the Chairman
Lead, Nickel

Source: Brian Hunt’s Market Notes Monday, June 30, 2008