Mergers and acquisitions are significant price driving forces in the stock market. Purchasing shares in a company before it is acquired is a time-tested way to earn huge returns. Should a bidding war erupt over the enterprise, that’s even better for the investors!

Locating a potential acquisition target already leading its industry and riding a major technological trend places the odds of a winning investment solidly in your court.

#-ad_banner-#Sounds easy to accomplish, right? Nothing could be further from the truth. The most efficient way to locate likely acquisition candidates is to wait for a rumor to surface. 

To be clear, I am not advocating investing in every acquisition rumor, but rather that you should use rumors as a first step in identifying potential investments. 

In most cases, the rumor itself is enough to push share prices sharply higher. Astute investors make certain that the target company is a strong investment, even if the acquisition never takes place.

In other words, the company should have much more going for it than an iffy buyout. 

I have identified a cutting edge, trend-leading company that has acquisition rumors swirling, yet would make a solid investment even without them. 

The company is InvenSense (NYSE: INVN). If you use an Apple (Nasdaq: AAPL) or Samsung smartphone, you likely use the company’s products. 

This under-the-radar company is leading in a critical niche for the future of wearables, drones, autonomous automobiles, smart devices, and the Internet of Things.

InvenSense is the world’s leading provider of micro-electro-mechanical systems (MEMS) sensor platforms. The revolutionary InvenSense fabrication platform is the core differentiating technology of the company.

As a result of the modular and scalable platform architecture, InvenSense’s current and planned products cross the spectrum from standalone single-chip gyroscopes to fully integrated sensor system-on-chip (SoC) motion tracking solutions.

InvenSense differentiates itself with a unique sensor SoC for the consumer and industrial markets. This sensor system handles imaging, sound, motion, and location tasks on a single chip. The revolutionary hardware system includes MEMS sensors, such as accelerometers, gyroscopes, compasses, and microphones with patented algorithms and firmware that intelligently process, synthesize, and calibrate the output of sensors. This technology allows InvenSense to provide market-leading performance and accuracy.

Second-quarter 2017 results released on November 3 show that the company beat revenue estimates by 16 cents in the second quarter but missed the EPS consensus by only a penny. The bullish news is that net income posted at just under $2 million against a loss of almost $5 million for the same time last year. Gross margins of 46% were unchanged quarter-over-quarter.

InvenSense CEO Behrooz Abdi commented bullishly, “The InvenSense team delivered solid results in the second fiscal quarter. We are encouraged that our R&D investments are beginning to pay off with new design wins which we anticipate will allow us to penetrate new markets. While the consumer and mobile markets were and remain soft, we believe this design win activity will position us for strong top line growth in fiscal 2018 as we strive to diversify our business.”

What has me excited about the company is that its current products are layered on top of its innovative existing portfolio. The latest product group includes the SensorStudio 2.2 release, the GenericSensorHub Platform, and the novel ICM-20690 development kit, which is a sensor prototyping and development platform for the Internet of Things.

SensorStudio is a commanding graphical development device created by InvenSense to ease the design and programming of an expanding range of sensors and algorithms.

We all know just how critical speed to market is in the technology business. These new developments enable companies to take algorithmic products to the market faster, providing the edge needed to thrive in the high-stakes world of internet connected products. 

The company recently retained an investment bank to evaluate indications of interest to purchase the firm. Rumors claim that Chinese and Japanese companies are among the likely suitors, but the negotiations are currently confidential.

Risks To Consider: Despite being on the cutting edge of a major technological trend, the company still struggles with the bottom line. I look at this as a market-driven aberration rather than the company’s fault. However, it remains a very real concern for the bulls.

Action To Take: Shares have fallen back from the initial takeover bid spike creating an ideal entry situation. Enter long if price breaks above $7.44 with initial stops at $6.23 per share. Our target price is $12.00 per share.

P.S. This year, the SEC cracked open a door it had kept shut since 1933. They finally allowed everyday investors to get into explosive early-stage companies BEFORE they go public — while they are still in their strongest growth curves. But here’s the thing… there’s only one way you can get into these startups — and here’s how it works.​