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The Davos Forum Day 2 – Other Investing Lessons

davos-2009-pictureFinally the world business leaders started to do their representative jobs in Davos, Switzerland, at the World Economic Forum. In other words, we at started to see them throwing to the world some hints with regards to their thinking on what constitute a good investment for the remaining 2009. Especially given the current financial crisis, this was much expected of them…

M&A business has slumped in the past year but companies with strong balance sheets positions are out on hunting bargains.

Most of the business leaders meeting in Davos this week said they saw opportunities in the global downturn, though the traditional leverage of the corporate power is out and a hard-nosed focus on cost cutting is the order of the day.

Still, they are seeing more opportunities. Mark Foster, consultant at Accenture, is expecting “further waves of consolidation as weaker players are taken over by stronger players”. “The retail industry is going to go through a big consolidation phase, as will the consumer goods, pharmaceuticals and communications industries.” These are all good news for the M&A industry, who plunged something like 30% last year.

So what are good investing opportunities? We are reffering here of course at investing in shares of companies who are either going to acquire other companies and be more successful, either at investments in the acquired companies, who in the process of M&A will see a signifficant increase in their shares.

Analysts refered to (as nice investment possibilities) not only to the pharma or retail sectors, but also to other ones. Roche Holding has launched a hostile bid last Friday for Genentech Inc.’s 44% which it does not already own. Another big sector, prone for restructuring, is the financial sector. We at expect that smaller regional banks, with solid street presence and strong balance sheet, will be soon targeted by the giants which are looking for ways to expand the traditional lending business in the U.S. territory. These possible share acquisitions are not easy to spot, but anyhow investing in such companies would not present a big risk, since they already have good business prospects.
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