Being a shareholder of a company that’s about to be acquired can be a fantastic way to see your investment portfolio grow. Being able to anticipate a deal by closely watching the markets and the news can be hugely beneficial.
And that’s the case again with Fitbit Inc (NYSE:FIT); the company recently entered into a deal with Alphabet (NASDAQ:GOOG)—also known as Google. Both Google stock and Fitbit stock are up, and this could pay off big-time for investors.
First, the major gains were seen by FIT stock. Shares of the wearable tech company had previously fallen on hard times since they first hit the market in 2015. Fitbit stock had lost roughly 70% in value from its initial $20.00 price.
Now Google is buying Fitbit at $7.35 a share, in a deal valued at $2.1 billion. (Source: “Fitbit surges 17% after Google agrees to buy the company for $2.1 billion (FIT),” Markets Insider, November 1, 2019.)
Chart courtesy of StockCharts.com
The deal is going a long way toward rescuing Fitbit stock, sending its share price soaring.
It’s going to be hard to make solid profits from FIT stock now that the initial rush is over, but that doesn’t mean there’s nothing still to be gained from the Google-Fitbit deal.
First of all, Google stock seems to be very valuable right now. The company is a premier artificial intelligence (AI) stock and it’s looking to be a big player in one of the most exciting sectors in the world.
The acquisition of Fitbit puts Google in a position to more readily enter the wearables market. This is a market that Google has long coveted (“Google Glass,” anyone?).
While Fitbit wasn’t able to keep its revenues coming in strong, the company will be able to lend some of its technology to the juggernaut that is Google, potentially boosting Google stock in the future if the company is able to translate the acquisition into a higher share of the wearables market.
But the real way that investors can benefit from the Google-Fitbit deal is more educational: identifying a company about to be acquired is a solid way to see massive share-price growth.
Potential Acquisition Targets
A company that’s an acquisition target is usually in one of two situations: 1) it’s underperforming and a larger company sees an opportunity to swing in and gobble it up while it’s cheap, or 2) it’s a fast-rising star and a potential rival to a bigger company that wants to absorb the competition.
In the Google-Fitbit case, it’s the former, and that’s why I’d like to direct your attention to a sector that’s replete with stocks that are currently on a downswing: marijuana.
Companies like MedReleaf and Canabo were huge winners for investors. Our paid newsletter Marijuana Millionaires featured both those companies early on, and savvy investors saw profits of 50% and 100%, respectively.
Those returns were extraordinary, but there’s no magic here. All it took was diligence and being prepared to pounce on a company just as it looks like it would be ready to be acquired (which happened with those two companies).
And that brings us to the marijuana stock market’s current position.
Pot stocks have fallen dramatically over the past few months. This is due to a combination of factors, chief among them fear of an oncoming recession and poor rollouts of legal marijuana in the U.S. and Canada.
But I believe all those problems are going to be rectified, and what’s more, many of the best pot stocks are at bargain prices right now.
Aside from being able to benefit from cannabis stocks by buying low, investors can get into these companies with the knowledge that acquisitions may not be far off.
With so many marijuana stocks now trading at low prices, there’s a decent chance that a consolidation will take place. That would not only help drive down costs by weakening competition (thereby increasing revenue and, hopefully, profits), it would also be a savvy move for companies looking to expand.
After all, for all the marijuana industry’s problems today, the future is as bright as ever. We’re talking about a multi-billion-dollar industry here with tons of potential for growth. Being the leader in this market could translate into massive share-price growth within a few years.
That said, there are three companies that we should focus on in this space: Hexo Corp (NYSE:HEXO), OrganiGram Holdings Inc (NASDAQ:OGI), and CannTrust Holdings Inc (NYSE:CTST).
All three of these companies have seen massive decreases in their share value over the past few months. At the same time, however, each of these companies have equally massive potential for a comeback.
But before that comeback sets in, there’s a good chance that larger companies would eye these three bargain-priced cannabis companies as great acquisitions.
Whether the larger company is looking to newly enter the pot industry on the cheap or it’s a competitor already in the sector and looking to consolidate its market strength, either scenario is a very real possibility.
If the aforementioned companies were to be acquired, then their share prices would likely soar, possibly by 100% in a short period.
It’s a risky proposition, no doubt, but one that I believe could pay off handsomely. Not to mention that I believe HEXO stock, OGI stock, and CTST stock will bounce back sooner rather than later, even if the companies don’t get acquired.
There are few better ways to earn big in the stock market than by scoring a strong stock early. Solid companies in their early stages make for great acquisition targets as well.
And as illustrated by the Fitbit-Google deal, acquisitions can rescue a floundering company and/or significantly juice a company’s share price. The marijuana companies mentioned above are all prime targets for acquisition, and should be on investors’ radars.