XRX to Buy AC

Another wave of merger and acquisition (M&A) announcements is set to lift the major averages higher. Xerox (NYSE:XRX) is buying Affiliated Computer Services (NYSE:ACS) for $6.4 billion. And Abbot Labs (NYSE:ABT) is buying a division of Belgium’s Solvay for $6.6 billion.

Normally, when a company buys another, its stock trades lower because the acquisition is expected to be a drag on earnings. Xerox is trading lower today. But Abbot Labs is up. Investors must like this deal a lot.

*****Last week, Goldman Sachs raised its forecast for global IT spending in 2010. The firm now expects corporate tech spending to rise 4% next year, instead of 2%.

Goldman also added one of my Top Stock Insights stocks to its Conviction List. I recommended NetApp (Nasdaq:NTAP) in June to take advantage of increased corporate spending on technology to boost efficiency and cut costs. We bought NetApp at $19.72 and at current prices north of $26, we’ve got a 33% gain. (Click HERE for more about Top Stock Insights.)

I expect Goldman’s upgrade to lift the stock higher. But even better, NetApp could be considered a buyout target for a big tech company looking to expand into the data storage space.

NetApp is the Number 2 player in data storage. But by all accounts, it has the best product offering. Dell (Nasdaq:DELL) bought Perot Systems (NYSE:PER) so it could enter the corporate IT services space. I won’t be surprised if somebody (like IBM (NYSE:IBM)?) goes after NetApp.

***** I recently discovered an excellent research tool for investors I’d like to share with you. It’s a website called Tickerspy. Tickerspy is creating a community of individual investors who share their investment ideas, research and stock market insights.

You can create your own portfolio of stocks and then the Tickerspy website will show you other members who are interested in that stock. Plus, you can see what other stocks members like and learn their thoughts on these stocks.  It’s a great way to learn more about the stocks you like, plus discover new stocks that might fit your investment criteria.

You have to register at the site, but membership is free. Here’s the Tickerspy link again.

*****In addition to M&A deals, what else could keep the Cash for Clunker Stocks Rally going? How about the sheer volume of cash sitting in money-market funds? Bloomberg reports that there is $3.5 trillion dollars sitting in money-market funds right now.

Throw in bank deposits and cash and the number rises to an astonishing $9.5 trillion. For comparisons sake, the total capitalization of the S&P 500 is $9.2 trillion. That means we could all get together, buy the S&P 500, and take it private. Talk about a great retirement plan – Barron’s says the dividend yield for the S&P 500 is 2.07%. That’s around $180 billion in dividends this year. I think we could live on that, right?

*****Of course, all this cash sitting on the sidelines isn’t earning diddly compared to what stocks have been doing. There’s no doubt this money could give stock prices a nice boost, if investors are willing to add some risk (stocks) to their investments.

***** My book The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks is now the #2 selling book in the “Stocks” category. Daily Profit readers have been a big part of that success, thank you very much.

Don’t forget – when you get your copy, you’ll also get a coupon good for $50 off an annual subscription to SmallCapInvestor PRO or any of my other advisory services.

With this $50 coupon, it’s like getting 3 months of the top-performing SmallCapInvestor PRO for free. Helping you make money is the best “thank you” I can think of.

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Until tomorrow,

Ian Wyatt

Editor

Daily Profit

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