Billions and billions have been flowing into private equity firms, as I have written about several times for BloggingStocks.com. To put such large sums to work means the targets need to be quite large. In fact, we are already seeing mega deals, such as the $31 billion offer for HCA.

This is certainly joyous news for Wall Street. After all, hedge funds are running out of ideas. Hmmm....how about looking for the next mega buyouts?

Well, a Prudential Securities analyst, Edward Keon, did just that recently. He is the director of Quantitative Research, which means he crunches huge amounts of data to come up with his stock picks.

So, he built a computer model that screened companies - looking for those characteristics that would interest private equity firms, such as significant amounts of free cash flow.

His picks? A sample includes:

Applied Materials (Nasdaq: AMAT)
Allstate (NYSE: ALL)
Hewlett-Packard (NYSE: HPQ)
Leggett & Platt (NYSE: LEG)
Genworth (NYSE: GNW)

Actually, Keon is so bullish that he is recommending 80% of his portfolios go into equities.

Not to be outdone, an analyst from Morgan Stanley, Henry McVey, has his own list that is based on his computer model.

His picks? Here are some:

EMC (NYSE: EMC)
Dell (Nasdaq: DELL)
Gap (NYSE: GPS)
Nike (NYSE: NKE)
Lexmark (NYSE: LXK)
Bed Bath & Beyond (Nasdaq: BBBY)

Tom Taulli is the author of various books, such as the Complete M&A Handbook and operates InvestorOffering.com.

Hot Lists: Stocks that look ripe for a takeover originally appeared on BloggingStocks on Mon, 21 Aug 2006 09:02:00 EST. Please see our terms for use of feeds.