Top Merger Stocks Held By Fund Managers, Mid-Q2 2024

seekingalpha05-19

Top M&A stocks of the 32 funds I follow.US Steel, the top stock held by merger-focused funds.Juniper Networks the second top stock. mohd izzuan/iStock via Getty Images The thing about merger ...

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Sometimes it seems easy for deals to complete, sometimes the IRR is decent, sometimes regulatory issues are benign. And then at times, it seems like deal spreads are either not much more than the risk-free rate of return, or they trade like deal bust is inevitable. Well, all we can do is navigate the landscape as best as we can, changing with the M&A winds. Each quarter, I compile the top 10 stocks held in the funds that specialize in merger stocks and share it with our Seeking Alpha community. My rules:  I only count a stock if it is at least 1% of the fund's portfolio. I only include stocks that are still actively trading. I only choose funds where the majority of positions are merger-related.   This quarter's top stock is United States Steel Corporation (X). 21 of my 32 funds own it as of March 31. In December, Japan's Nippon Steel reached an agreement with US Steel to buy them for $55 per share in cash. There is a whopping 47% spread as of this writing. Union support is needed, which may not be easy to get, and both political parties have talked about rejecting the deal. Cleveland-Cliffs (CLF) which tried to buy US Steel for $54 per share in a stock and cash deal before Nippon's deal was announced, has been adamant that the Nippon deal will not be completed. Still the arbs don't agree. Number two on the list is Juniper Networks (JNPR). In January, Hewlett Packard Enterprise (HPE) and Juniper agreed on a $40 cash merger with HPE buying Juniper. The companies expect to close the deal in late calendar 2024 or early 2025. There is currently a 16% spread. The deal is on a second request from the Department of Justice, and it remains to be seen if China's approval will be needed. Top 10 Merger Arb Stocks Held By Funds   1) United States Steel Corporation Held by 21 funds 83% IRR   2) Juniper Networks Held by 18 funds 27% IRR   3) Hess (HES) Held by 17 funds 14% IRR   4) Capri Holdings (CPRI) Held by 16 funds 114% IRR   5) Cerevel Therapeutics Holdings (CERE) Held by 13 funds 48% IRR   6) Albertsons Companies (ACI) Held by 12 funds 97% IRR   7) ANSYS (ANSS) Held by 11 funds 25% IRR   8) Axonics (AXNX) Held by 10 funds 18% IRR   9) Catalent (CTLT) Held by 10 funds 24% IRR   10) Amedisys (AMED) Held by 8 funds 18% IRR   Click to enlarge When a fund makes an M&A stock its top holding, it signals a strong belief that the deal will ultimately close. Only one stock was the number one holding of more than one fund at the end of the 2nd quarter. Top Position Among The 32 Funds   Hess Top Position in 4 Funds   Catalent Top Position in 1 fund   United States Steel Corporation Top Position in 1 fund   Click to enlarge Some arb funds oversize the positions that they have great conviction in. As of March 31, there were four positions of 18% or more in a single stock. Oversized Holdings   Catalent 29% of a Fund   Hollysys Automation Technologies (HOLI) 29% of a fund   Whole Earth Brands (FREE) 18% of a Fund   Hess 18% of a Fund   Click to enlarge Conclusion These days there are deals with large spreads with regulatory decisions hanging in the balance. And a host of others with spreads barely higher than the risk-free return of money. But there are always opportunities in M&A and the above data is a great place to start research.  Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2436154942"}