Following the four major mergers and acquisitions (M&A) announced on Monday, I think it’s safe to say that merger mania has officially commenced!
In addition to the weak dollar, which is a windfall for multinational companies, companies are also refinancing their debt at ultralow rates. So, everyone’s out refinancing their debt, which improves cash flow. Some companies take that cheap money and buy their competitors.
For example, if a company traded 50 times earnings and its competitor traded at 30 times earnings, the company can buy that competitor and instantly add to its earnings per share.
And that’s exactly what we saw on Monday.
NVIDIA Corporation & ARM Holdings
The most significant of the bunch involves the gaming, cloud and artificial intelligence giant NVIDIA Corporation (NVDA) and its $40 billion purchase of U.K. based chipmaker ARM Holdings from the massive tech investor Softbank Group (SFTBY).
If it goes through, it would represent the largest semiconductor deal in history and provide a massive boost to NVIDIA’s dominance in the sector and investors’ portfolios.
ARM’s software is in more than 180 billion chips worldwide and is used in just about every smartphone on the market, including Apple (AAPL) and Samsung. The company’s products are also used in everything from the fastest supercomputers in the world down to smartwatches, thermostats and health trackers.
Perhaps even more crucial to NVIDIA in the near term is ARM’s chipsets and software designed for data centers and the cloud, which has become a key revenue driver for NVIDIA. In its most-recent quarter, NVIDIA’s $1.75 billion in data center sales topped the company’s gaming revenue for the first time and was up 167%, year-over-year.
Combined with NVIDIA’s graphics processors (GPUs), the technologies could come to rule the cloud sector.
Following the announcement on Monday, the stock climbed over 5%.
Gilead Sciences & Immunomedics
In the pharmaceutical space, Gilead Sciences (GILD) said it will buy cancer drug maker Immunomedics (IMMU) for about $21 billion. The massive deal broadens Gilead’s reach into cancer drugs. Immunomedics’ breast-cancer drug Trodelvy, which was approved by the FDA in April, could bring in up to $5 billion a year in sales if it also works to treat other forms of cancer in the lung and bladder.
Gilead has completed more than 13 cancer drug acquisitions over the past two years as it seeks a solid entry into the highly lucrative sector. Breast cancer treatment sales alone will be worth an estimated $157 billion this year.
Immunomedics soared nearly 98% Monday on the news, while Gilead climbed over 2%.
Merck & Co. & Seattle Genetics
Another pharma deal involved Merck & Co.’s (MRK) plans to buy a $1 billion or nearly 2.9% stake in Seattle Genetics (SGEN). The companies said they’d co-develop and sell Seattle Genetics’ cancer therapy, ladiratuzumab vedotin. They’ll also see if they can combine it with Merck’s blockbuster cancer drug Keytruda to treat certain types of breast cancer and other solid tumors.
Seattle Genetics shares were up 14.5% Monday while Merck rose a modest 0.4%
Oracle Corp. & TikTok
On top of this exciting action, word leaked that Oracle Corp. (ORCL) beat out (MSFT) and other corporate giants to become the U.S. partner of the Chinese social media sensation TikTok.
The Trump administration has not been shy in stating its national security concerns with TikTok and its parent company, ByteDance Ltd. and its wishes for the company’s U.S. operations to be sold off to an American operator, with part of the proceeds going to the U.S. Treasury.
The deal with Oracle would reportedly not involve Oracle buying a majority stake in TikTok, but instead the company would expand its U.S. offices into a global headquarters with Oracle overseeing the security of the app’s data.
Oracle could benefit from such a deal by expanding its reach in the cloud computing sector, which is currently dominated by Amazon (AMZN) and Microsoft.
Clearly, it’s an exciting time for mergers and acquisitions in some of the hottest sectors — including software, cloud services, artificial intelligence and health care. And it just so happens that my Platinum Growth Club Model Portfolio is chocked full of recommendations in these industries.
Where to Find the Best Stocks
Take NVIDIA, for example. While some investors are only now jumping on NVIDIA’s train, my Platinum Growth Club subscribers are well ahead of the curve. In fact, in Growth Investor, NVIDIA is sitting pretty on my Buy List with a 204% return since my recommendation in May 2019. I also later added it to my Platinum Growth Club Model Portfolio this past June, where it currently holds a 47% gain.
So, whether you prefer to build your own portfolio or follow my Model Portfolio exclusively, as a Platinum Growth Club subscriber you’d be making good money on NVDA either way.
I handpick all of my Model Portfolio recommendations, so you can rest assured that no matter what you choose, you’re investing in the crème de la crème.
If you want to be invested in the crème de la crème, it’s important that you know that the best buying window for these stocks is closing soon. Quarter-end window dressing kicked off on Monday and will continue through the next two weeks. This is when investment managers make their portfolios “pretty” by shoring up on fundamentally superior stocks. Or, in other words, my Platinum Growth Club stocks. This, in turn, boosts them higher.
Then, on the last day of September, we’ll have the smart beta and equally weighted ETF realignment. This always helps my stocks, too. So, now is the time to join before my Platinum Growth Club recommendations really start firing on all cylinders.
Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owned the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Amazon (AMZN), Gilead Sciences (GILD), Microsoft Corporation (MSFT), NVIDIA Corporation (NVDA)