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Millions of investors find mergers to be complicated and murky undertakings, best left to Wall Street's "Armani Army."
I look at 'em differently and think you should, too.
That's because mergers are one of the single greatest profit generators out there.
Today, we're going to talk about why and how you could play along for big potential profits…
Why Free Cash Flow Is Your Key to Big Profits
Take the all-stock merger between Harris Corp. (NYSE: HRS) and L3 Technologies Inc. (NYSE: LLL) that was announced, for example.
The deal is a transaction between "equals" – meaning neither company is assuming a dominant position over the other. Instead, you're getting a single, far larger, integrated defense contractor.
The new and aptly named "L3 Harris Technologies Inc." will generate something on the order of $16 billion a year in sales that should translate into profits of around $2.5 billion, according to company representatives.
That's good by any stretch of the imagination.
But I'm into GREAT.
That's why I started Total Wealth and why we're in this together.
It's a well-proven formula… line up with one or more of the Six Unstoppable Trends, identify the world's best companies, then buy the ones making "must-have" products and services the world cannot live without.
That's what this merger is.
The newly formed contractor will instantly become the nation's sixth-largest defense contractor and a top-ten global defense supplier with 48,000 employees and customers in 100+ countries around the world.
Critically, this will also produce an estimated $1.9 billion in "free cash flow."
That's the key to life-changing profits, especially today, and especially when it comes to a transaction like this one.
Free cash flow – if you've never heard the term before – is the cash a company produces after it pays for operations, less the cost of capital expenditures.
That's a mouthful of very technical terminology, but there's a reason I want you to understand the term.
Free cash flow is a metric not unlike the cash you have in your pocket. Plan efficiently, and you've got more of it… after you've paid for your gas, your food, and other living expenses.
Click Here to Find Out Why Your Financial Future Could Change Forever on October 23rd
Companies use free cash flow as a barometer for potential business expansion.
Sadly, most investors don't pay a lot of attention to it, and the mainstream news outlets almost never discuss it.
They should.
Free cash flow is the one metric capable of sorting out the winners from the losers objectively, especially when it comes to big mergers and acquisitions like the L3-Harris deal.
You see, unlike most opinions, which are completely subjective, free cash flow is an objective measure that can provide great insight into things like operational efficiency, potential profitability, how much money is left over for buybacks or dividends, and more.
But I also like it for another reason.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.
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