Robbie Burns
Robbie Burns's columns :
21/12/20152016 Trading Picks
04/11/2015IPOs Which Look Interesting
22/09/2015Rules for Trading During a Volatile Summer
10/08/20155 Companies That Might Get Taken Over >>
10/06/2015Gambling on Exciting Companies Loses You Money
10/04/2015Investing In Companies When a Bid Fails

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Robbie Burns – The Naked Trader

Robbie has been trading full-time since 2001. His book "The Naked Trader" (which also has useful information on how to use advfn) has become one of the biggest-selling finance books, reaching the top 150 books on Amazon - order it here. Trades made for Robbie's website have amassed profits of more than £300,000. You can read about his buys and sells daily at www.nakedtrader.co.uk.


5 Companies That Might Get Taken Over

10/08/2015

There's been a whole spate of bids for small cap shares recently. Anite and Thorntons, for example, and one I had only recently bought in the expectation of a bid, Aga.

Aga got me a 50% increase which was very nice. It looks like there is plenty of cash around for bigger companies to buy up the small fry on the cheap.

Eventually, if you do get a cheap small cap share there's a decent chance it will get bought out and I usually manage to get 5-6 of these a year.

Every time you get it right there's usually a 30% to 50% increase in the share price. I usually find it's a good idea to sell some just in case the bid doesn't go through and hold onto the rest. The price of the share usually goes to somewhere near to where the market thinks the eventual bid price will be.

Once the bid is guaranteed you can either sell the shares at a small discount to the price (I usually do that) or wait for the full cash, which takes about 1-2 months usually.

Anyway, what are the next small caps to fall?

I have a few ideas and so here are 5 companies I have stakes in hopeful that one morning I will wake up to the glad tidings. Really, there is no better feeling than seeing the news a company you have shares in is going to be swallowed up.

5 potential bid targets:

1. Gulf Marine Services (LSE:GMS) - this is an under the radar oil services company with a share price that doesn't do a lot except sit between 115 and 130 most of the time. It's one of the leading providers of support vessels in the world. Profits are up and it appears to be continuing to expand nicely. I would imagine this one to be a very handy fit with any number of oil services companies looking for acquisitions. And although its boss has said it isn't for sale, I reckon an offer of 200-220p would be successful and it really wouldn't be a surprise.

2. Iomart IOM (LSE:IOM) - this one already got bid for last year but an agreement wasn't reached at the 300p level. I think a bid around 350p is on the cards here giving a 100p plus uplift to the price. This cloud computing outfit is putting out bullish statements with adjusted profit up nearly 15% in its last results.

It's been buying up companies itself. But I reckon within the next 6-9 months it will fall to a predator as the "cloud space" will see a lot of bids and mergers. I got lucky getting a 215p to 270p uplift last time. This time I'm in between 170p and 210p.

3. Quartix (LSE:QTX) - this one specialises in supplying vehicle tracking systems, a market where there is currently good growth. Pre-tax profit grew by nearly 10% in the last year and debt has been nearly wiped out.

At the current price with a market cap of well under £100m, there are loads of big companies for which this would be a nice buyout for small change - for them. I've been in this since around 120p.

4. GB Group (LSE:GB.) is one of my favourite ever companies. Been in it for nearly 5 years buying initially at 20p, now there is an extra nought in front of that as it trades around 200p now. Rightly so, it's been in the right space at the right time, identity data intelligence.

The chart is a thing of beauty, lovely rises, then plateaus then rises again. I have a feeling the directors would be happy with a bid of 275p here. It's got such a lovely niche area that there might even be a bidding war over it.

5. Verona Pharma (LSE:VRP) – this one is an interesting penny tiddler that I picked up in the 3-4p area. It focuses on drugs to treat respiratory diseases. One of the drugs in its pipeline could treat cystic fibrosis. It's raised a decent lot of cash to keep going and if any of the drugs get approval the share price will go bananas.

But in the meantime, there are a few big drugs companies out there that could take an interest and just buy up Verona. Vectura, for example, a much bigger company that also specialises in the same area. So I think if I was in charge of Vectura I might have a look.

All the above, of course, is pure speculation on my part; none of them may get bid for. But in any event, all the companies are going well enough in their own right.

Often patience is required in holding these types of companies especially if they are non-movers, but patience often pays!


You can read Robbie’s daily market comments together with his latest buys and sells at his website www.nakedtrader.co.uk

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