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Merger Mania – Small Cap strategies for 2010

Today's Financial News - Posted December 22, 2009

Louis Basenese, Small Cap and Special Situations Expert with Investment U, provides his small cap investment strategy – focusing on Merger & Acquisitions and how to track the fundamentals necessary for an active merger season.

Louis Basenese (Investment U):

The masses balked at my projection.

And, as they so often are, the masses were wrong.

It’s not like I went out on a limb or anything either. All I said in November 2008 was that investors should load up on small-cap stocks for 2009.

But boy, did I hear it: “You’re nuts. We’re in the throes of the worst financial crisis since the Great Depression. Small-caps will be lucky to make it out alive.”

I paid little attention to the criticism. And that’s simply because the historical precedent was undeniable.

Time and again, history has shown that small-cap companies traditionally outperform their larger-cap peers in the wake of a recession. It’s happened in every single one of the past 10 recessions.

And we can now extend that winning streak to 11.

Since the market bottomed out, the average small-cap stock has soared 74%, outpacing the gains of the average large-cap by a full 15 percentage points.

And history is sending another loud and clear message about what lies ahead for another sector, too.

In 2010, we can expect mergers and acquisitions (M&A) activity to return in a big way. Here’s why – and the three best ways to play the imminent rebound…

M&A Activity: Deep in the Valley… But Set to Emerge

Not since the early 1990s have we witnessed such a meager market for M&A activity…

Worldwide deal volume is expected to slump by 56% this year, according to the Organization for Economic Cooperation and Development (OECD).
The United States has already matched the 61% drop in M&A activity that followed the 1990-1991 recession. We’re not far from the 72% drop that followed the 2001 recession.
But everybody knows the M&A market is notoriously cyclical. Since we’re clearly in the valley, it’s only a matter of time before activity picks back up.

And history is crystal clear about the timing of the turning point…

Click here for the rest of Mr. Basenese’s analysis at Investment U.


Next Article: TFN eNews 12/23/2009: Last-minute gains before the holidays!

Posted by Louis Basenese · Filed Under Investment Strategies 

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