Rumours on share takeovers

Currently in the market I'm in right now, there is so much hype about takeover bids by almost every company, in this period of consolidation. We are currently in the 5th year of a bull market and everyone is excited about future prospects. I've seen so many takeover bids occurring on the market, but almost all not going through. They were just rumours. Whenever theres such a rumour the result is that the share price jumps, by a significant amount indeed. However, the message I wish to convey here is to not get excited about such prospects. Remember, we are all investing for the long-term, which is a sure winner in most companies. Instead of selling the shares once there is a takeover bid, we should consider our prospects and we can still hold on to the shares. I take the takeover bid as another short-term market craze, which is only temporary. In the long-term the share price will always reflect its true value.

Sometimes it is also good to accept a takeover bid. The bidding company might bid for the company more than what it is truly worth. Hence, it is wiser to accept the offer than reject it. There is no one answer of what to do whenever there is a takeover bid, it all depends on the circumstances. If I feel that the company still has good long-term prospects and can grow more in the future, I would hold on to the stock. Remember to only hold on to stocks that are relatively undervalued. When a share has reached its true value, its best to hold it, and when it gets abit high its best to sell it then.

So we shouldn't be doing what others might think of doing in this current market condition, that is try to guess which company would likely be the target of the next takeover bid and buy their shares just so they can make an instant profit. Ignore the rumours and go on with whats really important, searching for undervalued shares. It might not be easy, but eventually you'll be better of than the investors who did not do what you have done. When I say eventually, i mean the long-term which could be anywhere between 5-10 years. It pays to have good hindsight in this game of investing.