Financial Advisors Look at Trimble Amid Acquisitions and Speculations in Dutch Media
The US got clobbered in October, with major indices giving up their year-to-date gains and slipping into the red territory. The Dow Jones Industrial Average lost 8.30% in October and is currently down by 1.54% year-to-date. The S&P 500 slid by 9.69% during the month and 2.02% year-to-date. The tech sector got hit the hardest, with the NASDAQ Composite slipping by 12.3% in October, but the strong gains in the previous months offset the losses and the index has inched down by just 0.22% since the beginning of the year.
Even though the month had a good start with the US, Canada, and Mexico finalizing a new trade deal that would replace NAFTA, things quickly made a turn for the worse.
The October 5 non-farm payrolls report released by the Bureau of Labor Statistics showed a big miss. In September, the US economy added 134,000 jobs, which was substantially lower than the expected figure of 185,000. However, the unemployment rate of 3.7% was lower than the expected 3.8%. Moreover, the July and August figures were revised higher by 18,000 to 147,000 and by 69,000 to 201,000, respectively.
In the second half of October, the stock market was focused on the third-quarter earnings season. According to FactSet, by October 26, 48% of the companies in the S&P 500 had reported their results, with 77% of them posting better than expected earnings and 59% beating the revenue estimates.
The mostly positive results got some investors and analysts to question the October sell-off. So far, the opinions have been mixed and it’s unclear what exactly caused investors to sell. However, among the possible causes are the tightening of the monetary policy by the Fed, which is expected to continue raising interest rates, and the possibility of further trade tensions with China, with some reports indicating that President Trump could set tariffs on more imports.
In this environment, Financial Advisors focused on more under-the-radar small and micro-cap stocks, similar to the previous month. TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, analyzed the data on most searched tickers in October and determined that among the ten most popular stocks, all but two had a market cap below $1.0 billion. The two stocks with market caps above $1.0 billion were Trimble Inc (NASDAQ:TRMB), which was the most searched ticker in October, and real estate investment trust Annaly Capital Management, Inc. (NYSE:NLY), which landed on the fourth spot.
Larger companies, such as Alibaba Group Holding Ltd (NYSE:BABA), Etsy, Inc. (NASDAQ:ETSY), Boeing Co (NYSE:BA), Alphabet Inc (NASDAQ:GOOGL) also ranked among the most popular stocks but were further down the list.
Let’s now take a closer look at Trimble Inc (NASDAQ:TRMB) and try to identify the reasons why this stock was the most searched among Financial Advisors last month.
Trimble is an $8.7-billion company that is engaged in the development of Global Navigation Satellite System receivers, laser rangefinder, unmanned aerial vehicles, inertial navigation systems, and software processing tools. In October, the company’s stock dropped by 17%, offsetting the gains from the previous couple of months and is currently 14% in the red year-to-date.
There were several developments that could’ve put Trimble on the radars of Financial Advisors in October. The company started the month by announcing the acquisition of Brazil-based Veltec, a privately-held company that provides fleet management solutions for transportation companies.
The acquisition of Veltec announced on October 8 wasn’t the only deal that Trimble inked during the month. On October 29, Mack, a leading manufacturer of trucks, announced that it had entered into a memorandum of understanding with Trimble’s subsidiary Trimble Transportation Enterprise. Under the terms of the deal, Trimble Transportation Enterprise will help Mack study how it can help its customers to get a better view of their fleet performance and increase productivity.
In addition, Trimble announced a partnership with Pulsar Informatics, which specializes in providing Fatigue Risk Management solutions. Both companies will work together on developing a system to monitor drivers’ fatigue.
However, the biggest news involving Trimble came from across the pond. Dutch newspaper De Telegraaf wrote that Trimble might be a potential buyer for the producer of traffic, navigation, and mapping products TomTom. The speculation comes from ING experts in response to a previous report from TMT Finance that speculated that TomTom could be acquired by mapping and location data provider HERE, which is owned by a consortium consisting of German automotive companies Audi, BMW, and Daimler. However, according to ING experts, antitrust authorities might not approve this deal. Therefore, they consider that there could be other buyers.
However, while Trimble and TomTom might have some synergies and the former is focused on international expansion as evidenced by the acquisition of Veltec, nothing was announced officially. TomTom could be priced at between $2 billion and $2.5 billion and it’s hard to say if Trimble could swing that. The company already has over $1.3 billion in long-term debt and $570 million in cash as of the end of June.
Moreover, Trimble could face competition from a much bigger company that could also be interested in TomTom. The other buyer speculated by ING could be Apple, according to the Dutch media. Apple already has a deal with TomTom as the latter supplies it with mapping data for its maps app. Recently, Apple said it was rebuilding map app for iPhones from the ground up and would be using its own dataset collected from its own fleet of sensor-equipped vans, but would still rely on TomTom for mapping data, although it was unclear to what extent. Needless to say, Apple has so much cash on the books that it could easily buy TomTom.