Lorillard Jumps on Buyout Rumors…Again

(LO, $62.63, up $5.90 at the close)

Shares of tobacco giant Lorillard, Inc. (LO) rose over 10% today on rumors that Reynolds American Inc. (RAI) will make a buyout offer.  Morgan Stanley commented,

  • “Press coverage – now Reuters – indicates that RAI is preparing to bid for LO.  But there have been insider sales at LO, and RAI has been repurchasing its stock.  Financial and strategic benefits are obvious, but so are menthol risks, and FTC issues are considerable.  Parties have not commented.”

On April 30 (and prior), I assessed this potential M&A scenario, including a review of the earnings outlook, stock valuation, and technical chart.  My recommendation remains the same: use tight stop-loss orders.  If no buyout materializes, the stock is overvalued and will most likely fall back down.

Goodfellow LLC rating:  Hold, Growth & Income, Public.  (05-21-14)

LO Chart

LO data by YCharts

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Send questions and comments to research@GoodfellowLLC.com.

Happy investing!

Crista Huff


Goodfellow LLC

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