FreeMarkets (99.16)

ONE Stock Guaranteed to Move Higher Today!!!

June 22, 2010 – Comments (3) | RELATED TICKERS: RAH , AIPC.DL

It's not often I'm willing to put my neck out and pick a stock for a one day short move, but sometimes you just have that gut feeling, so here goes.

Ralcorp Holdings, Inc. (RAH - NYSE)

This maker of generic cereals got blasted yesterday when they paid a 25% premium to buy American Italian Pasta (AIPC - NASDAQ).  With RAH worth ~ $3 billion  and AIPC worth ~ 1 billion, the 7% drop in RAH seemed to make perfect mathematical sense.  However, this acquisition is perfect for RAH, giving them another outlet into their strength in grain products. Yes, this is a long term quality acquisition and I will be adding it to my CAPS portfolio.

Normally I wouldn't expect a one day bounce, but news that AIPC is being investigated for breaching its fiduciary duty to its shareholders in agreeing to the sale, makes me think that RAH got a bargain by picking up this young company before it became a behemoth.

Let me also add that RAH has consistently been a defensive stock and done very well during down days in the market.  Today is shaping up to be another down day in the market.  At 10 am we will get home sales data and the market may shift to a more positive bias, or sink like a toilet.

DISCLOSURE:  I do not own RAH, but may before 10 am.

PLEASE DO NOT REC THIS POST UNLESS YOU ARE SURE I AM RIGHT!