Buyout tryouts

  • 29 January 2012 |
  • Written by  Skot Kortje, Stock Trends Analyst
  • font size
  • Print

Most of the buyout stocks that make it into Stock Trends portfolios are dead money - trades destined to go nowhere and a drag on long-term portfolio performance. But sometimes a buyout stock delivers.

Shares of RuggedCom Inc. (RCM-T) jumped today on news that the company's board has accepted a friendly buyout offer made by Siemens AG (SI-N). At $33 a share, Siemens' bid to acquire RuggedCom, a maker of IT equipment for the industrial sector, is $11 per share above the hostile bid previously made by Belden Inc. Siemen's offer extends a142% premium on the value of RuggedCom's stock before the Belden bid, which was then trading below $14.

Stock Trends subscribers will be interested in this development. RuggedCom is currently a holding of Stock Trends TSX Portfolio #1, bought at $25.80 in the aftermath of the Belden bid when the stock met the portfolio buy criteria on January 20. Shares of the company today closed at $32.85.

Of the 484 positions taken by the Stock Trends TSX Portfolio #1 since 1993, about 10 have been because an acquisition announcement caused the stock price to break out to the valuation level of the announced deal. Because the model portfolio is based on trend and price momentum, a few buyout stocks, like RuggedCom's, have met the trading strategy's buy criteria. Almost always these trades go nowhere, and generally are a drag on the portfolio's performance.

However, sometimes the intial buyout offer spurs other parties to make a competing offer. This, of course, is a desirable outcome for shareholders of the coveted company and can result in tidy, profitable trades - even for latecomers to the stock. But timing trades in merger and acquisition prospects is not the intent of the trend-following trading systems promoted by Stock Trends.

Although the trading strategies employed here are attempting to capture stocks that are breaking out into a new bullish trend, these buyout stocks would not pass for a proper trend trade since the end-game - the acquisition price - has already been established and disseminated in the market.

Nevertheless, the Stock Trends mechanical trading systems are strictly applied, regardless of the material news driving a move in the share price. There is no secondary evaluation of the stock's suitability. In a sense, the RuggedCom trade is a failure, as are all buyout stocks that trigger a buy signal. The trading strategy objective cannot be met - a new bullish trend will not be achieved.

That this particular trade results in a profit of significance, courtesy of a subsequent higher bid, is a bonus. A welcome bonus.

 

Published in Stock Trends
More in this category: « Improving signs for the stock market NYSE Bullish trend breadth turns positive »
back to top

Subscriber Testimonials

  • I've followed a number of Stock Trends picks, and the methodology is solid.

    Doug B., Subscriber

  • Hence, anyone who had followed the "Stock Trends" line should have sold their Bre-X shares and, with the windfall, paid for a lifetime subscription to The Globe and Mail and more. Talk about return on investment!

    Muni P., Subscriber

  • I am something of a momentum investor. I find Stock Trends useful as I can look at my portfolio as a “watch list” and quickly see where trends are declining in strength or reversing, so it is particularly useful as a tool in portfolio management regarding sales.

    William C., Subscriber

  • I am just writing to tell you of my appreciation of your service! It makes so much sense to me. You seem to be an oasis of stability and sensibility in a stockmarket jungle.

    Adrian S., Subscriber

  • Your report is an impressive, excellent tool and I have recommmended it to friends.

    Colin E., Subscriber

  • I am fascinated with your service and methodology - it is very impressive. [...] Over the years I have concluded that there are many ways to approach stock investing, but once one has chosen a path, one is better off sticking to it.

    Bob E., Subscriber

  • Just thought I'd call to thank you, Skot. Stock Trends Weekly Reporter helped pay for my daughter's education!

    Peter H., Subscriber

  • I use Stock Trends to help direct my stock picks. Also, following the advice of Stock Trends I have religiously used stop-loss orders and have avoided hanging on to losing stocks for emotional reasons.

    John B., Subscriber

  • Thank you for your excellent work and kind approach to your customers.

    Odette C., Subscriber

  • I've followed your recommendations since reading your columns in the Globe & Mail, and finding they published Stock Trends arrows in their financial listings. I do find them a guide to the general market and what I should be avoiding for declining chart trends.
    Has probably saved me the subscription by not rushing into hot stocks!

    Anthony D., Subscriber

  • I find your website and research very helpful in my stock trading. I have subscribed to several related services in the past and none present their work with “just the facts” as you. Please keep up the great work so that I can continue to learn! 

    Bryan E., Subscriber

  • You have created and maintained an amazing, highly educational program and I am grateful for your part in getting our retirement funds to the good place they are.

    Karin M., Subscriber

  • I have had the good fortune to be reasonably successful and enjoy the investment process. Your process would be recommended for both experts and those who are new to investing.

    Frank I., Subscriber

  • Stock Trends analysis quantifies nicely the movement of individual stocks. I’ve found that if the technicals are out of synch with fundamental analysis, it is a wake-up call to make a decision. The Stock Trends Bull/Bear Ratio is useful in identifying major market bottoms and tops. It has always presented a good buying or selling opportunity.

    Charles G., Subscriber

  • Stock Trends Weekly Reporter is an easy way to pick up equities that represent an upward trend.

    Subscriber

  • An admitted cynic, it's obviously very high praise when he says he likes StockTrends because of its "simplicity, utility, openness, [and] honesty," and in addition to having "no hidden agenda" is "understandably documented [and] historically verifiable." And, he adds, "It lets me see a lot of things without doing a lot of work." Globe and Mail

    Paul W., Subscriber

  • I want to thank you for posting such an excellent guide to technical analysis on the web. You have provided a great service to all of us novice investors.

    Michael C., Stock Trends user

  • Stock Trends information is part of the base information I review before making a trade.

    Subscriber

  • There is a lot to be gained from comparing trends of how individual stocks are doing within a sector, as well as how the sector is performing relative to the broad market.

    Dudley R., Subscriber

  • I very much like the systematic approach to analyzing stock data, it fits my approach.

    Subscriber

Subscription Plans

Subscription Plans

STWR - Monthly

$19.95

Monthly subscription plan to Stock Trends Weekly Reporter - pay your monthly subscription fees by having them automatically charged (PayPal only). Free 7-day trial period. Subscribers may cancel before the end of any subscription month.

STWR - 1 Year Prepaid Subscription

$199.00

1 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 16% off monthly rate!

STWR - 2 Year Prepaid Subscription

$299.00

2 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 37% off monthly rate!

STWR - 3 Year Prepaid Subscription

$399.00

3 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 44% off monthly rate!

Stock Trends Editorial

  • Leadership Beneath the Surface: How Stock Trends Identifies System-Critical Equities
    Leadership Beneath the Surface: How Stock Trends Identifies System-Critical Equities The broad market still reads as a rotation market rather than a generalized expansion phase. Energy, Materials, and Utilities remain the clearest sector-level leadership blocs, but the current Stock Trends dataset shows that a second layer of leadership is now becoming more visible beneath the sector averages. That secondary leadership is important because it does not present itself as broad participation. It appears instead through specific industry groups whose internal trend structure is materially stronger than that of their parent sectors. In this week’s data, the clearest examples are Semiconductors and Equipment, Telecommunications, Containers & Packaging, and Banking.
    29 March 2026 Read more...
  • Indexing Is the Baseline—Probability Is the Edge
    Indexing Is the Baseline—Probability Is the Edge The case for indexing continues to strengthen, and rightly so. The evidence is overwhelming: most active managers fail to outperform their benchmarks over time, and the costs of attempting to do so only compound the underperformance. For many investors, indexing has become not just a strategy, but the default solution. But the conclusion that often follows—that markets cannot be meaningfully outperformed—is where the interpretation begins to break down. The failure of traditional active management is not evidence that opportunity does not exist. It is evidence that non-probabilistic selection fails.
    24 March 2026 Read more...
  • Continuation, Not Expansion: What the Probability Structure Now Reveals
    Continuation, Not Expansion: What the Probability Structure Now Reveals The current market is not offering investors the kind of broad speculative expansion that often defines the early phase of a powerful advance. Nor is it confirming a simple risk-off breakdown. The latest Stock Trends dataset points to something more disciplined. The probability structure remains constructive, but it is now being expressed primarily through continuation and consolidation rather than broad breakout expansion.
    21 March 2026 Read more...
  • When Headlines Darken but the Probability Structure Holds
    When Headlines Darken but the Probability Structure Holds The recent Stock Trends editorials argued that hard assets had become structural leaders and that capital was rotating across themes rather than collapsing into a simple risk-on or risk-off binary. This week’s data adds a new layer. The market’s probability structure has improved even as the macro headlines have become more hostile. That is a distinct signal, and it is coming directly from the Stock Trends Inference Model.
    14 March 2026 Read more...
View all Stock Trends Editorials
Subscribe to this RSS feed
 
 

Subscription Plans

STWR - Monthly

$19.95/Month

Monthly subscription plan to Stock Trends Weekly Reporter - pay your monthly subscription fees by having them automatically charged (PayPal only). Free 7-day trial period. Subscribers may cancel before the end of any subscription month.

STWR - 1 Year Prepaid Subscription

$199/Year

1 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 16% off monthly rate!

STWR - 2 Year Prepaid Subscription

$299/2 Years

2 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 37% off monthly rate!

STWR - 3 Year Prepaid Subscription

$399/3 Years

3 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 44% off monthly rate!

Member Login