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Author: olivet1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 68  
Subject: Buyouts Date: 4/18/2012 11:30 AM
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If the stock price often rises substantially, when the buyout of a company is announced, wouldn't it be relatively easy to monitor companies about to be bought out, buy their stock before, then sell it when it rises upon announcement?
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Author: TMFSpiffyPop Big gold star, 5000 posts Old School Fool Supernova Phoenix 1
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Subject: Re: Buyouts Date: 4/20/2012 3:57 PM
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Olivet1,

First off, thanks for finding and using this board! I love it when we discover new Fools at early ages. The earlier you ask questions like the one you asked, the earlier you will find financial independence; there is a one-to-one correlation.

It sounds like you're wanting to find winning stocks, and in this case asking a question based on buyouts.

Buyouts generally do occur at a premium, so I see why you'd ask this. However, unannounced buyouts are kept secret. Once announced, stocks are often halted for trading -- and then when they resume they are automatically pretty much already trading at the expected buyout. Thus, there is no quick way to act effectively in the intervening time; kind of like football or basketball, there's a halftime announcement of the buyout and you can't play ball during halftime.

What we focus on is looking for great companies that we want to be owners of. We invest in those. In some cases -- I can think of Priceline back in 2004 -- I will highlight the possibility of a company getting acquired if I think it's higher probability. In the case of Priceline, I was wrong! AND, funny enough, Priceline has done so well on its own that it became Motley Fool premium services best pick ever recently -- up 30 times in value. So I'm glad I found a quality company. Even when I think something might get bought out, I would only buy it if I wanted to keep it anyway!

Hope this gives you "news you can use," that there is information in this post that you can take away and learn from. Feel free to ask any followup questions.

Way to be a student investor!

Foolishly,

David Gardner

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Author: olivet1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63 of 68
Subject: Re: Buyouts Date: 4/20/2012 6:12 PM
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Thanks for the reply David! Very informative. As far as other questions go, its hard to narrow it down ha. I've been contributing to my 401k as well as an IRA with USAA, trying to figure out the best allocations there. I'm actually waiting for my funds to clear from my bank account. I plan on making that first step into the market on Monday for individual stocks. I've done quite a bit of research so we will see what happens there (any suggestions?). As far as the 401k goes, would you recommend a target retirement fund? I had that originally, but I just recently changed the allocations because I'm seeing much better returns in other areas. I went with a 75/25 stock/bond split. I chose some index funds that seem to be doing very well this year, as well as past years. Also, what would you recommend for my IRA? I previously had an income fund, but that was blindly picked years ago. I just changed it to a much more aggressive index fund. Should this compliment the 401k somehow? Sorry for the long winded reply, but you asked for it :P

Thanks in advance,
Ryan

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Author: BoiseKen Big red star, 1000 posts Old School Fool Ticker Guide CAPS All Star Mission Olympia 2 SN Explorer 1 Mission Team Member Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 64 of 68
Subject: Re: Buyouts Date: 4/21/2012 9:04 AM
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Ryan,

I've done quite a bit of research so we will see what happens there (any suggestions?).

My best advice (which I gladly took 5 years ago) is to take a free preview of one of the Motley Fool's premium services. You can check out a service like Stock Adviser for free for a month. Get all the back issues, read the boards, etc.

If you haven't already done it, set up a CAPS account so you can play your market hunches without risking real capital. I found CAPS a great place to experiment and learn.

If you like what you find, I think you will find that the cost of the subscription is much less expensive than fees paid to a financial adviser.

BoiseKen
HAS Ticker Guide

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Author: TMFBro Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65 of 68
Subject: Re: Buyouts Date: 4/23/2012 11:04 AM
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Hi, Ryan.

I am a fan of target retirement funds for investors who want to take a more hands-off approach to investing, or for those who want to be more active but are just beginning to learn about investing. These funds provide a reasonable mix of stocks and bonds, including all types of stocks (large caps, small caps, U.S. stocks, international stocks), and the funds are automatically rebalanced and gradually get more conservative as you approach retirement.

The reason you might be seeing better returns with the other choices is because a 75/25 stock/bond split over the past three years has proven to be a rather conservative allocation. However, it held up better during the 2008 recession. So, as always with investing, there is a trade-off with risk and return. Historically, if you're a couple of decades from retirement, then you'll earn higher returns from an all-stock portfolio, as long as you can tolerate the ups and downs. This doesn't mean you can't use a target retirement account -- you just choose a fund with a later retirement date, which thus has a more aggressive allocation.

Investors who want to take a more hands-on approach may want to choose other funds than target retirement funds, which seems to be what you've chosen to do. That's a perfectly fine solution -- it's what I do. But I follow the same principles by making sure I have funds that invest in various types of stocks.

As for your IRA, that's the place to buy individual stocks. For help with that, you can take a free trial to Stock Advisor or one of our other services (www.fool.com/shop/newsletters/index.aspx). As you suggest, what you choose in your IRA should complement what you have in your 401(k). For example, if you choose an international index fund in your 401(k), there's no need to also choose one in your IRA.

Best,
Robert Brokamp

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