Doc's note: One of the biggest mergers in entertainment history could take place after Netflix agreed to buy Warner Bros. and HBO Max last Friday. That's if the Trump administration approves the deal.
While mergers this massive aren't common, smaller mergers – that could make investors big gains – happen more and more often. But, as Joel Litman – from our corporate affiliate Altimetry – explains, you need to know how to spot them before most folks...
Inovalon was trading for less than $30 per share... But we knew it was worth a lot more...
The health care data platform was getting more valuable by the day. It had one of the largest medical-information datasets on the planet. And the health care industry was rushing to become more data-driven.
As we watched the story play out in the spring of 2021, we could just feel the money being left on the table.
We weren't alone. A few months after we recommended the stock in Altimetry's High Alpha, rumors started to trickle in. Word on the street was that a couple of private-equity investors were interested in Inovalon.
And by that September, the deal was done. Nordic Capital and Insight Partners swooped in to buy Inovalon at $41 per share... a massive premium.
Subscribers who followed our advice booked a 47% gain in just six months.
Inovalon is far from alone. Time and again, we've seen huge one-day jumps from a single piece of news – a tiny company is getting snapped up by a deep-pocketed buyer.
Roughly a year after Inovalon, we saw a similar story play out in Altra Industrial Motion...
The power-transmission maker was ripe for the picking... And the rest of the industry knew it.
Less than a week after our October 2022 recommendation, Altra agreed to sell itself to electric-motor maker Regal Rexnord (RRX). Shares soared on the news. We closed our High Alpha position up 52% in a month.
And just last year, we recommended equipment-rental company H&E Equipment Services to Microcap Confidential subscribers. The rest of the industry saw what we saw... H&E was a small but valuable fish in a big pond.
Before long, the business was on track to be acquired by rental giant United Rentals (URI). While the deal ultimately fell through, it didn't matter to us.
Shares more than doubled overnight on the idea of a deal. Subscribers who followed our advice locked in a 101% gain in seven months.
We're not telling you about these trades to brag...
We want you to understand... this isn't dumb luck.
Our method of identifying these types of trades works. And that's because much of what we look for in a recommendation is exactly the same as what a potential acquirer looks for...
- High and/or improving returns that are misunderstood by the market
- Industries with macro tailwinds
- Fragmented industries with room for consolidation
- Market leaders with a strong competitive advantage and no significant threats
Even more important, the winds are shifting for mergers and acquisitions (M&A)...
During the height of the pandemic, companies weren't making deals. They were sitting on their hands, waiting to see what would happen next.
Just as deal-making was picking up, the 2023 bank run put a new wrench in things. The Biden administration threw up countless roadblocks. M&A became such a burden that it just wasn't worth pursuing deals.
Both deal value and volume fell to 10-year-plus lows. And that further silenced the M&A market.
The Trump administration was supposed to throw the doors wide open in its pursuit of deregulation. But 2025 kicked off with uncertainty about tariffs and a shaky geopolitical environment.
Once again, management teams took a wait-and-see approach. They've been sitting on their hands for much of this year.
But at long last, that's finally changing...
Merger activity is heating up thanks to lower interest rates and fewer regulatory hurdles.
Management teams have more confidence to pursue deals. A few months ago, companies announced $80 billion in M&A deals in just one day.
Folks, we're looking at a lot of pent-up demand for acquisitions. And I believe I've found a prime target for hungry buyers.
Like Inovalon, it deals in data. And in the midst of the AI revolution, that's an even better place to be than it was in 2021.
This business has a lot to offer a potential acquirer. And an announcement could send shares soaring... making it a potential "one-day double" in the making. Learn more here.
We haven't seen an M&A environment like this in years. Deals are gaining momentum. I expect many more announcements as we head into 2026.
It's time to buy in.
Regards,
Joel Litman
