This week on Mad Money, Jim Cramer will be giving viewers a special stock tip each week -- a company that he believes is a target for a leveraged buyout by a private equity firm. Last month, Goldman Sachs (NYSE:GS) released a report which Cramer called "terrific," detailing the characteristics of stocks that it believes are attractive buyout candidates. He noted that private equity funds look for "poorly run companies that generate a lot of cash" and opportunities to improve margins and sales.
While I'll be looking forward to Cramer's picks as much as anyone, remember that buying a stock on pure speculation of a potential buyout at some point in the future is probably not a good enough reason to buy a stock. Make sure that you would be comfortable owning the company even if it isn't taken private.
And remember: Private equity firms aren't different from most investors -- They are looking for stocks that are cheap and produce reliable cash flow. If you look for these companies, you will find stocks that are solid investments with the added bonus of a potential buyout.
