Checkfree, another one of my picks, gets bought out

Posted Aug 2nd 2007 3:05PM by Georges Yared
Filed under: Forecasts, Deals, Chipotle Mexican Grill'A' (CMG), Books, Opsware Inc (OPSW), aQuantive Inc (AQNT), 25 Stocks for Next 25 Years, Color Kinetics (CLRK), Zoltek Co (ZOLT)

In my book about Baby Boomer investing I highlight what I feel are the five major growth industries going forward. The industries are health care, alternative energy, technology, communications and lifestyle. I also mention 42 companies within those industries that could be the leaders, the game changers. Since the book has been published, five of the 42 stocks I wrote about are being acquired!

The latest one to go is Checkfree (NASDAQ: CKFR). Fiserve (NASDAQ: FISV) has announced its $4.4 billion bid. Checkfree made our banking-transactional life much easier. The other four that will be part of larger companies are Opsware (NASDAQ: OPSW), Color Kinetics (NASDAQ: CLRK), aQuantive (NASDAQ: AQNT) and Kyphon (NASDAQ: KYPH). Other than aQuantive, the other three were also part of my Top 25 stocks for the NEXT 25 years series.

As the 42 companies are down to 37, it causes some reflection for the future. Great, emerging companies will always be on the radar screen of larger, well-financed suitors. If growth cannot be internally generated through research and development efforts, larger companies will need to acquire growth and next generation products or technology. With interest rates still historically low, the borrowing necessary to buy these young, up-and-comers is not a significant issue. Investors will reward mature companies if they acquire intelligently and strategically.

Other stocks that have run significantly are Chipotle (NYSE: CMG) and Zoltek (NASDAQ: ZOLT). Back in Decemeber, Chipotle was barely $40 and is now at $99 -- this one will not get bought out. The current P/E ratio is too high, so any buyer would have to absorb huge dilution to their own current earnings -- investors do not like that!Zoltek, was $19 then and now trades at $46. Several investors I speak with seriously feel Zoltek, now at a $1.35 billion market capitalization, could be a $10-12 billion market cap company. Zoltek is also another top 25 stock for the NEXT 25 years.

I believe at least 20-25 of the 42 will be acquired before the decade is finished. That's the nature of capitalism.

I will replace the three names for the Top 25 stocks for the NEXT 25 years before the weekend, but I am not ready to write a new book!

The book Baby Boomer Investing ... Where do we go from here?, released In December 2006, is also about the past 30 years and the incredible accomplishments achieved in technology, health care and life style as well as companies that changed and improved our lives. More importantly, at least I think so, I write about where I think our generation is going from here in terms of investing. There are 78 million of us Baby Boomers and the challenges we face in the next 20+ years are huge.

Georges Yared is the CIO of Yared Investment Research.

Tags: aqnt, aquantive, chipotle mexican grill, ChipotleMexicanGrill, clrk, cmg, color kinetics, ColorKinetics, inthenews, opsw, opsware, zol, zoltek