Investment adviser Charles LaLoggia isn't one of those bears who always focuses on the stock market's dark side, no matter what. But in recent months, LaLoggia has been a big bear, arguing that "we are amidst a wildly overvalued market." Even so, he has been bullish about certain stocks--takeover stocks. "That's the only game worth playing--the authentic buyout bait," says LaLoggia.
"I look for companies where there is tension or some kind of conflict between stakeholders and management that usually lead to a change of ownership or a deal," says LaLoggia, who edits and publishes the newsletter Special Situation Report and Stock Market Forecast from Rochester, N.Y.
So far, LaLoggia has been on target in picking takeover targets. Some of his recent winners: Vermont American, which he caught at 19 3/8 before it was taken over at 40; Kay Jewelers, discovered at 8 and acquired at 12; CertainTeed, recommended at 26 1/8 and bought out at 41; Ramada, discovered at 6 and acquired at 10; and Champion Products, found at 33 and acquired at 52.
So, what are LaLoggia's current picks? He's sure that Goody Products, Lancaster Colony, Loctite, and WMS Industries are buyout bait.
Goody, a maker of hair brushes, combs, and sunglasses, is being eyeballed by Newell, which has taken a 10% stake. LaLoggia believes Newell, a big cosmetics and household products company, will make a bid for Goody. Any deal has to be friendly because the Goody familiy owns 54%. Acquisition-minded Newell so far has acquired 40 companies. Goody declined comment on Newell's stake.
LOGICAL FIT? Lancaster Colony, which turns out automotive products and specialty foods, is also deemed a target of Newell, which has acquired a 4.6% stake. Newell has applied for regulatory permission to raise that to 15%. Lancaster President John B. Gerlach, who owns some 23% of the stock, has been buying more shares, and the company authorized a share-buyback.
Loctite, which is 26.6% owned by Germany's Henkel, is getting pressure from former Loctite Chairman Robert Krieble, who controls 9.8% of the stock. His group has retained First Boston to seek a buyer for the company. The company says it isn't for sale.
WMS, a maker of coin-operated games and owner of several hotels and casinos, is 30%-owned by Sumner Redstone, chairman of both Viacom, the media-TV company, and National Amusements, an operator of movie theaters. The logical fit between WMS and National Amusements, says LaLoggia, means WMS is an easy takeover target for Redstone.