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Last week, I emphasized that despite the market's recent setback, the U.S. economy is in overall good shape.
Turns out I'm not the only one who "gets" the economy's fundamental strength.
The United States' 3.9% economic growth is fueling a historic boom in mergers and acquisitions (M&A). In fact, a recent report from Dealogic pegs the value of U.S.-targeted deals so far this year at nearly $1.7 trillion – 45% higher than last year's pace.
This represents the biggest nine-month period ever for domestic M&A and accounts for fully half of the $3.4 trillion in global deals.
You can credit the robust pace of American M&A to the fact that our economy is expanding while Europe's stagnates and China's growth rate cools. Plus, with the U.S. Federal Reserve keeping interest rates near zero, companies are finding it cost effective to borrow the capital needed to finance takeovers.
And here's what's really exciting…
There's one tech-related area that's particularly attractive to investors right now.
And it's an industry that Wall Street had all but written off just seven months ago.
Today I want to show you how to profit from the current M&A boom by using a tech investment that history says is all but certain to beat the market over the next two years…
The Real Driver
Wall Street never tires of overreacting to the slightest negative news.
We saw it happen this past February when Washington began cracking down on "tax inversion" deals.
In a tax inversion, a U.S.-based company buys a foreign one in a country where corporate taxes are lower. Then the company "moves" its headquarters there (on paper).
Tax inversions became popular among biotech and drug firms partly because they lower a company's corporate income taxes.
To hear mainstream analysts tell it, tax breaks are the only reason inversions became popular. But that's not true.
The other reason American biotechs seek to buy foreign firms is because many of those offshore companies happen to have a deep pipeline of new drugs.
In fact, in a conversation we had here on Feb. 20, I said the desire to save on the expense of bringing new drugs to market – a process that can take a decade and cost $1 billion – would continue to drive drug and biotech M&A.
Which is exactly what occurred….
A recent report from Thomson Reuters puts health-related deals, including biopharmaceuticals, medical devices, and insurance firms, at the top of the M&A heap for the first half of this year, the last period for full data in this sector.
All told, those health-related mergers totaled roughly $254 billion in the period – 25.2% of all American M&A.
The fourth quarter will finish strong as well.
Consider that on July 27, generic drug leader Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) agreed to pay some $40.5 billion to acquire the generics business from Allergan Plc. (NYSE: AGN).
We'll see more of this going forward as biopharma companies use M&A to bolster pipelines, cut costs, and expand their geographical reach.
How to Play It
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.