Market Overview

MKM Looked To The Options Market To Find Its Top 10 M&A Targets


Following Anthem Inc (NYSE: ANTM)'s bid for Cigna Corporation (NYSE: CI) this past weekend, MKM Partners analyst Jim Strugger released a report focusing on the booming M&A environment. The report includes a customized stock screen that MKM performed to identify the top potential future M&A targets.

Learning From The Options Market

The screen that Strugger uses in the report focuses on information gleaned from the options market.

“We have previously discussed intelligence that can be culled from the options market to help identify potential targets, primarily focusing on volatility surfaces exhibiting inverted skew,” Strugger explained.

Screen parameters

According to the report, MKM’s M&A screen uses six options market factors: skew over one- and two-month timeframes, one-and three-month term structure, current put/call open interest ratio and its change over the past 30 days and the increase in call open interest. These factors are then weighted and used to rank more than 1,200 optionable U.S.-listed stocks with market caps over $1 billion.

Stugger believes that this screen and others like it that attempt to utilize option market data are one of the few tools that investors have for predicting M&A events.

The Top 10

MKM’s screen ranked the following ten stocks as the best potential M&A targets:

1. Starwood Hotels and Resorts Worldwide Inc (NYSE: HOT)
2. NCR Corp (NYSE: NCR)
4. Quest Diagnostics Inc (NYSE: DGX)
5. Sprint Corp (NYSE: S)
7. Atmel Corp (NASDAQ: ATML)
8. Hilton Worldwide Holdings Inc (NYSE: HLT)
9. Amicus Therapeutics Inc (NASDAQ: FOLD)
10. Yelp Inc (NYSE: YELP)

Latest Ratings for ANTM

Nov 2019MaintainsHold
Oct 2019MaintainsOutperform
Oct 2019MaintainsOverweight

View More Analyst Ratings for ANTM
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Posted-In: Jim Strugger MKM PartnersAnalyst Color M&A Analyst Ratings


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