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The clock was ticking down to 4 p.m. Eastern on Friday, and many investors and traders on Wall Street were more focused on their weekend plans than their Bloomberg terminals.
But then without warning, shares of chipmaker Altera (ALTR, Weiss Ratings: B) exploded higher by more than 20 percent. The largest chipmaker in the world, Intel (INTC, Weiss Ratings: B) also took off like a rocket. The catalyst? Late-breaking news that INTC was in advanced talks to buy ALTR for several billion dollars.
|Last week, news broke that Intel was looking to make its biggest-ever acquisition.|
Intel focuses on chips for the personal computer and server business. Altera concentrates on so-called “field-programmable gate arrays,” chips used in things like autos, phone networks, and the like. Intel would gain access to that faster-growing business through any transaction, and broaden its product line.
While talks could still fall apart on details like price, this doesn’t sound like a poorly sourced article. It’s also not the first mega-deal in the semiconductor space, NXP Semiconductors (NXPI, Weiss Ratings: B) recently agreed to acquire Freescale Semiconductor (FSL, Weiss Ratings: B-) for almost $12 billion.
Then this morning, we got even more deal news in a completely different industry — health care!
|“These kinds of deals tend to whip investors into a frenzy searching for the next batch of takeover targets in the same industries.”|
The giant health insurer UnitedHealth Group (UNH, Weiss Ratings: A) said it would buy pharmacy benefits group Catamaran Corp. (CTRX, Weiss Ratings: B) for almost $13 billion. The deal is designed to help UNH rein in the rising cost of drugs by bulking up its OptumRX unit. The division negotiates pricing with pharmaceutical providers.
Meanwhile, the Irish-based company Horizon Pharma (HZNP, Weiss Ratings: D) announced plans to buy Hyperion Therapeutics (HPTX, Weiss Ratings: C-) of California for $1.1 billion. The deal will add Hyperion’s blood toxicity drugs to Horizon’s suite of products.
I’ve been following the markets for a long time, and these kinds of deals tend to whip investors into a frenzy searching for the next batch of takeover targets in the same industries. What’s interesting this time is that semiconductor stocks were in the process of breaking down technically when the Intel news hit. Biotech stocks also got hit hard in recent days.
Just look at a chart of the Philadelphia Semiconductor Index (SOX). Or the iShares Nasdaq Biotechnology ETF (IBB). You’ll see they’ve been getting hammered recently on heavy volume, but that they both caught a late-week bounce.
Can more sector deals help these key market leaders regain market momentum? Or are they going to keep rolling over anyway? Have you made money from the stocks I mentioned earlier, and are you looking for other sector targets? Or do you think other industries offer the potential for bigger gains? Let me know over at the Money and Markets website.
My personal opinion is that we have NOT yet seen the kinds of mega-deals at absolutely insane valuations that often mark a top. One thing that inspired me to call a major peak in real estate investment trusts (REITs) back in 2007, for instance, was a $39 billion Blackstone (BX, Weiss Ratings: B+) “Buy and flip” deal in the space. REITs collapsed not long after.
Is something similar waiting to happen in tech and health care? Again, weigh in at the website when you have a minute.
|Our Readers Speak|
The latest Middle East tensions and the negotiations with Iran prompted many, many investors to comment over at the website, and for that, I’m grateful. It’s always tough to suss out a generalized consensus, with so many people weighing in. But clearly, many of you don’t want the U.S. bogged down in yet another round of fighting in that part of the world.
Reader Mike said: “How soon we forget. Only a few years ago, most Americans asked why American men and women were being sent to fight and die in the Middle East. Now we have a president who has quietly forged alliances and relationships in the Middle East.
“Middle Eastern men and women are doing the fighting and (sadly) the dying, ISIS is taking a beating and mercifully, only a few Americans are complaining that the U.S. must be the world’s policeman. With any luck, we won’t have to wait for them to be shut up due to more American body bags once again returning as casualties to their hometowns.”
Reader Chuck B. added: “Sadly, Iran is, like it or not, a sovereign state, just like the U.S. If they choose to build a bomb, there is not much we can do about it outside of war. India built bombs. Pakistan built bombs. North Korea built bombs. We couldn’t stop them, and chose not to go to war.”
Finally, Reader S.O.F. said: “Civil and religious wars are the most vicious kinds of conflict because the basic differences between the two sides are very personal. External third parties that get involved in such personal conflicts become part of the war’s collateral damage and are usually despised as meddling outsiders by both sides.
“The lesson here seems obvious: The U.S. should stay completely out of civil and religious wars being fought in the Middle East.”
But will a “hands off” policy just make things worse? Will it lead to even more vicious conflict, and a dangerous new enemy (Iran) gaining too much power? Reader Fred1 offered the following views on that topic:
“Rumors are flying around that the Saudis, Jordanians, Egyptians, UAE, Turks and possibly others are not going to sit still if Obama signs this bogus agreement with Iran … an agreement everyone knows the Iranians will not uphold.
“These Sunni countries have seen enough of the Shiite aggression, to the point that they are all sick of it. It appears that they will not wait any longer while Tehran, given free reign by Obama, finishes the last details of its grand plans for regional domination via the development of nuclear weapons.
“And then, of course, you have the Israelis. They will obviously not sit by idly and watch the Iranians (possibly) whip these united Sunni forces. This whole idea of Obama jumping into bed with the Iranians, signing a treaty without the input of Congress as required by the Constitution, and snubbing our old allies will likely be remembered as the worst foreign policy mistake in U.S. history.”
Reader Kraig C. also thinks we need to take a hardline approach to Iran, saying: “Why Obama is negotiating with Iran is beyond me. We have nothing to gain and everything to lose. Iran is our enemy. Iranian leaders have repeatedly called for ‘death to Americans.’ We, or our proxy Israel, should bomb all of Iran’s nuclear facilities. Iran has plenty of oil for its energy needs.”
Again, there are lots of hard questions and no easy answers. Almost any approach we take is fraught with peril. So the best you can do as an investor is monitor the situation and try to protect your wealth when new threats emerge. I’ll do my best to tell you how here in Money and Markets. And if you have any other ideas, be sure to share them using this link.
Other Developments of the Day
Airstrikes continued to pound Houthi positions in Yemen overnight, with the Saudi-led attacks targeting everything from troops to air defense systems and missile launch pads.
Leaders from several Arab nations said they would form a regional, multi-national force to respond to crises and rebel uprisings in the Middle East. But questions remain about who would contribute what, and how effective such a force could be.
The other key development affecting the region is the nuclear negotiations with Iran. They’re coming down to the wire, and the U.S.-led side is struggling to find common ground with Iran.
Iran wants economic sanctions lifted quickly if it agrees to dial back its nuclear research efforts. But the U.S. only wants to do that gradually as its examiners verify that Iran has ceased its prohibited activities.
Herbal supplements and vitamins are big business for companies like GNC Holdings (GNC, Weiss Ratings: B+) and Vitamin Shoppe (VSI, Weiss Ratings: C+). But what are you really buying when you pick up a jar of pills at the store?
The New York attorney general’s office wants customers to know, and it just announced an agreement with GNC that requires the company to test its products better. Critics say the industry has had it too easy for too long when it comes to policing supplement suppliers. But the deal included no fine, and found no evidence GNC’s testing process failed to comply with FDA requirements or industry standards. So the shares of both retailers had a nice day.
Several of America’s largest corporations, including those with significant operations in Indiana, are fighting back against that state’s recently passed religious legislation. Critics say the “Religious Freedom Restoration Act” that was signed last week by Indiana Governor Mike Pence allows businesses to exclude gay customers if they have a religious objection to homosexuality. That has prompted everyone from Apple (AAPL, Weiss Ratings: A+) CEO Tim Cook to companies like Salesforce.com (CRM, Weiss Ratings: D+) and Eli Lilly & Co. (LLY, Weiss Ratings: C+) to protest the state’s actions.
Here’s the link to the website where you can comment on these news stories or others you’ve seen.
Until next time,