By Ann Sosnowski

It's been quite a week for mergers and acquisitions and we're only two days in.

One of the most interesting acquisitions occurred today between American tire company Bridgestone Americas Holding Inc. and Bandag Inc. (BDG:NYSE).

Bridgestone Americas is a subsidiary of Japanese Bridgestone Corp. (currently a pink sheet stock). Bridgestone Americas will pay $50.75 per share, or $1.05 billion in cash for Bandag. The deal will close by the end of the second quarter in 2007.

Bandag is a manufacturer of retread tires, and is a good acquisition for Bridgestone, because it's receiving an increasing amount of orders for retread tires. Retread tires are old tires taken off of vehicles, made bald and retread, and then sold at lower prices.

But this begs the question: Is this a good time to buy tire companies?

Well, a look at cyclical movements in these tire companies showcases an interesting trend.

Goodyear Tire & Rubber Company (GT:NYSE) has shown increased stock-buying activity from December to February. Last year, GT gained 12% from December 2005 to the end of January 2006.

Cooper Tire & Rubber Company (CTB:NYSE), based out of Ohio, also exhibits similar runups, even though it's been in a long-term falling trend since 2004. CTB gained 12.9% from December 2005 to January 2006.

And Bandag Inc. (BDG:NYSE), the retreading company, exhibits pops around the same time, though it's a bit inconsistent and not as powerful when the rallies do occur.

Last year, the fourth quarter was the best for sales for all three companies. However, the most recent quarter, ending in September 2006, was strong as well.

All three companies cited a good product mix, increased sales, and increased product pricing as factors for the strong quarter. And all three companies beat low estimates for the tire industry, which drove herds of investors into their stocks.

This time of year, fraught with fear of snow and ice, is when consumers decide to replace or repair their tires for safety reasons.

Does this mean these stocks will thrive again this year? My money's on yes. Raw material costs for rubber are expected to decrease through the rest of the current fourth quarter, but are still 11% higher than they were last year.

However, the current decrease in natural rubber could be short-lived. Natural rubber has been the worst commodity investment for the year, but it's expected to begin rising in price again due to surging demand in China (for automobiles no doubt) as well as rising oil prices. The rubber industry is highly correlated to the oil industry, which of course, is expected to rise as well.

Rubber has plunged 36% this year. But it's expected to begin rising again into mid-2007 by about 15%, according to industry analysts.

According to the Tokyo Commodity Exchange (TOCOM), December futures for rubber are at 182.1 yen per kg, or $1.59 per kg.

For May 2007, rubber futures are already up to 197.8 Japanese yen per kg, or $1.72 per kg. That's an increase in five months of 8.18%… which could double by early 2007 if analysts have their way with their expectant 15% increase.

This will most likely hurt the bottom lines for these tire companies in mid 2007 due to higher costs.

But as for this winter season, their rubber supplies are already locked in, and these stocks should continue to see strength going into the tail end of January 2007.

Any gains made up to then should be taken immediately.