2025: The Year of Takeovers? Here’s What Traders on Trend Need to Know

2025 is shaping up to be a monumental year for stock investors, especially for those keen on mergers and acquisitions (M&A). With several market catalysts aligning, savvy traders should stay alert to capitalize on emerging opportunities. According to Brandon Nelson, senior portfolio manager at Calamos Investments, conditions for robust M&A activity are burgeoning, making it crucial to identify the right stocks that can weather the waves of acquisition fever.

Why 2025 Could Be the Year of Acquisitions

Brandon Nelson attributes the potential M&A boom to three central factors:

1. A Shift in Regulatory Climate

The new leadership at the U.S. Federal Trade Commission (FTC) is more merger-friendly under Andrew Ferguson, signaling a shift from the previous aggressive stance against consolidations. “Conditions can only get less hostile,” Nelson asserts. This means pent-up demand for deals is likely to surface, exemplified by recent takeover proposals for companies like Intra-Cellular Therapies (ITCI) and Inari Medical (NARI), with shareholder gains soaring between 50% to 100% following these announcements.

2. Rising Corporate Confidence

Another factor driving this optimistic outlook is the revival of “animal spirits.” With economic conditions improving, corporate management teams are increasingly on the lookout for acquisitions. This growing appetite for deals has already influenced investment-banking fees, particularly observed in the earnings reports from major players like JPMorgan Chase (JPM), Goldman Sachs (GS), and Morgan Stanley (MS), indicating that dealmaking is ramping up.

3. Easing Credit Conditions

Lastly, companies are finding it easier to raise capital, with analyses showing net percentages of lenders tightening loan standards at zero. This easing credit landscape enables more corporate entities to pursue acquisitions, fostering an environment ripe for M&A transactions.

Stock Picks with High Potential for Growth

As we mull over potential gains from M&A, it’s essential to look at companies that could resonate well even without acquisition bids. Here are five stocks to watch:

1. Instacart (CART)

Motley Fool’s Emily Flippen believes Instacart could merge seamlessly with Walmart (WMT), especially in grocery deliveries. However, her insights show that even without a buyout, Instacart’s improving profit margins and solid free cash flow position it well for growth.

2. Roku (ROKU)

Streamlining the TV experience, Roku has already infiltrated over 85 million households. According to SanJac Alpha’s Andy Wells, Roku makes itself attractive to larger players like Walmart, all while having a durable consumer base market to leverage for future growth.

3. Viking Therapeutics (VKTX)

With a promising drug pipeline, Viking Therapeutics has recently seen its share value dip. Given increased interest in weight loss drugs amid the Inflation Reduction Act, the company is a ripe candidate for acquisition or organic growth.

4. ADMA Biologics (ADMA)

This company specializes in plasma-based products that have great revenue growth, projected at nearly $480 million this year. Nelson notes that the momentum in ADMA’s business will not only attract potential acquirers but also lead to significant stock performance.

5. Rush Street Interactive (RSI)

In the fast-paced online gaming arena, Rush Street has mastered customer engagement effectively, pulling two-thirds of its revenue from casino games, ensuring a high margin. Nelson points out that even without acquisition, Rush Street’s unique positioning gives it tremendous upside potential in the stock market.

Three Smart M&A Investing Tips

As an astute trader navigating the M&A waters, consider the following strategies:

1. Avoid Chasing Rumors

Keep your cool! Speculating on stocks spiking due to takeover rumors could lead you into whipsaw territory. “These are not investible moments,” warns Nelson.

2. Quick Profit-Taking on Deal Announcements

When a stock shoots up following acquisition news, it’s generally a good time to sell. Waiting for a bidding war is often not worth the hard-earned capital.

3. Tread Lightly with M&A ETF Options

While M&A-focused ETFs like NYLI Merger Arbitrage (MNA) and AltShares Merger Arbitrage (ARB) seem enticing, be wary. They usually underperform their more event-driven fund peers, often leaving you wanting.

With the winds of change blowing towards a lucrative M&A landscape in 2025, it’s prime time to identify and act on potentially enduring stock opportunities while being mindful of the volatility surrounding acquisition news. Stay sharp, keep your momentum in check, and let’s seize these market trends before they pass us by!