Canadian Solar: The Next Solar Takeover Target?

When a sector is booming, consolidation and takeovers start to pick up as well. Take a look at the networking and semiconductor sectors in the late 1990s, and the internet sector in the early 2000s - several good companies were taken over by industry leaders, such as Cisco (CSCO), PMC-Sierra (PMCS) and Google (GOOG). These companies accelerated their growth by acquiring many smaller competitors. This is a must-step for a sector before it becomes mature.

As an investor, the difficulty is how to spot a company that is a likely takeover target. This can bring massive profit if it does happen, and even the speculation will drive the stock price sky rocketing, no matter what happens in the overall market. A good example in the last week is DOW Chemical's (DOW) attempt to buy Rohm & Haas (ROH) for $15B, sending the stock 70% higher than its previous day close. But wait, this is just beginning. The next day, in the same sector, was Ashland's (ASH) announcement to acquire Hercules (HPC) for a buyout premium of about 38% over the shares' Thursday closing price.