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One of Your Stock Investments is Being Acquired: Now What?

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  • (0:30) - What To Do When Your Stock Is Acquired
  • (6:40) - Breaking Down Past Merger and Acquisitions
  • (14:20) - Episode Roundup: CVS, OXY, ABBV, AGN, PDCE, CVX

Welcome to Episode #178 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

Recently, she got a question from a listener about what to do when a company they are invested in is about to be acquired.

It’s not as straight forward as you might think.

Many times, the shares will soar on the news. Only, it can then stall out near the acquisition price, sometimes for over a year, waiting for the deal to go through.

Are You a Trader or an Investor?

The response to an acquisition announcement could be different depending on whether or not you are a trader or an investor.

For a trader, the stock usually rises near the deal price and then doesn’t do much after that.

Last June, AbbVie (ABBV - Free Report) announced it was buying Allergan in a $63 billion deal. It was paying $188 a share.

Allergan soared on the news and has mostly stayed near that price, although recently it has traded as high as $198.

The deal is expected to close in 2020.

Traders would have moved on from the stock months ago. But investors have other things to think about.

Sometimes They Get Multiple Offers

Occasionally, the first offer isn’t the final offer.

Last year Occidental (OXY - Free Report) got into a bidding war with Chevron (CVX - Free Report) over Anadarko. Occidental ended up winning, but the price paid to Anadarko shareholders rose.

It paid to be patient if you were an Anadarko shareholder and wait to see how everything played out.

Are Mergers Always Successful?

In November 2018, CVS (CVS - Free Report) closed on its acquisition of health insurance giant Aetna.

But over the last 2 years, shares are up just 5.3% versus 22.7% for the S&P 500.

If Aetna shareholders remained loyal to CVS, they’re not faring very well so far.

What else do you need to know about what happens when one of your companies is acquired?

Listen to this week’s podcast to find out.

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