I’m an early riser.
I get up before the sun every morning, in part because I can’t wait to get the day started. I’m often the first one in the office, although my CEO and I have a bit of a competition going.
The first thing I do every morning is check the headlines. I get up to speed on what happened overnight in foreign markets, and corporate announcements often come early in the morning.
My absolute favorite way to start the day is with news that one of my companies is getting acquired. I can tell you from experience that there’s nothing better than waking up to find out one of your stocks just made you a lot of money overnight.
My subscribers and I experienced that thrill this week. One of the microcap stocks I just recommended, Adesto Technologies (IOTS), was bought at a price 57% above where it closed the day before. We locked in total gains of 65.5%… in just 15 days.
It usually doesn’t happen that fast, but great companies – especially smaller companies – can make you money when they get acquired.
Let me show you what I mean…
Companies buy other companies all the time.
The late 1800s and early 1900s include what some people call the Great Merger Movement in the United States. A lot of smaller companies were acquired or joined forces to form larger corporations. Many familiar companies, like DuPont (DD), General Electric (GE), and United States Steel (X), grew to dominate their markets this way.
Mergers and acquisitions, or “M&A” for short, remains a tried and true strategy today. Businesses buy other businesses to boost growth, enter new markets, enter new territories, eliminate competition, and other reasons.
Last year, M&A activity totaled $4.09 trillion, according to Dealogic. Technology was the leader, with nearly $210 billion spread across more than 650 deals.
The biggest companies and biggest deals always get the attention. Everybody is interested in the “blockbusters.” But honestly, small companies are where you want to be.
Here’s proof: From 1992 through 2018, 86% of all merger and acquisition activity took place in microcap stocks.
That’s exactly what we saw with Adesto Technologies. I recommended the stock because it had all the makings of a small company on the way to becoming large… and making investors a lot of money along the way.
Adesto makes semiconductors and embedded systems for the Internet of Things (IoT) industry, which has a total addressable market (TAM) of $32 billion as more and more devices connect to the internet. The company had a market capitalization of just $220 million when I recommended it, yet it had more than 5,000 clients, including household names like Honeywell (HON), Johnson & Johnson (JNJ), and Amazon (AMZN).
In addition, revenue growth is impressive, and Adesto is expected to report near breakeven earnings for 2019 with a big jump in profitability to $0.20 per share here in 2020.
To top it all off, the stock was a bargain because it flew under the radar of most investors. Its forward price-to-sales ratio was just 1.21 when I recommended it, and its forward PE was 12.78. Those are the kind of valuations you would see for a large, slow-moving utility – not a hypergrowth microcap.
When you add all that up, it’s no surprise that a bigger business like Dialog Semiconductor (DLGNF) – worth approximately $3 billion – would like Adesto for exact the same reasons I did. It’s a well-positioned company with a great product in a massive trend that was available at a bargain price.
I never suggest buying a stock simply because it may get acquired, but I don’t have to. If it’s a small company with a great business that meets all my investing criteria, I know there will be companies sniffing around it as well.
And when one of them does a deal, you can earn big profits overnight.
P.S. I have a whole system designed to identify small stocks with the best chances to grow large… and make investors a lot of money in the process. Just like Adesto Technologies.
I explain it all in the recent Microcap Millionaire Project event. More than 10,000 people tuned in to see how buying microcaps can “boost” the gains they’re seeing from blue chip stocks and index funds. You can watch the full presentation here.
I also released my 10 favorite microcap stocks at this point. We already locked in big profits on one, but the remaining nine are also in high-growth industries that could soar 1,000% or more. Click here to learn how you can get started today.
Matt McCall’s MoneyLine Podcast
Click here to listen to Matt McCall’s MoneyLine podcast! This week, Matt fills us in on earnings season. The world’s largest cannabis company reported strong numbers… so could this be the trigger to ignite the next major rally? Nvidia (NVDA), a leading chipmaker, also reported blowout results that show just how strong the tech sector is. Finally, Matt wraps up with his thoughts on biotech IPOs and their huge money-making opportunities.
You can subscribe to this podcast on iTunes, Stitcher, Spotify, or wherever you listen to podcasts.
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