He said it might be impossible to take over Merck, which is currently worth $23 billion, without considering a takeover premium.

For Time shareholders, a big question is how much of a takeover premium was included in the current stock price of $109.125 a share.

Add a takeover premium to these prices and you get expectations that even the most brilliant manager could not hope to meet.

Q. For the past couple of years a good number of bank stocks had a takeover premium built into their stock price.

Predicting the takeover premiums that such potential targets can garner is difficult.

But anyone hoping for such a payoff should pay attention to what industry they are buying into, because the takeover premiums vary accordingly.

"In three years, I strongly believe there will be takeover premiums in these stocks," he said.

The timing is such that the price even includes something of a takeover premium.

And are those hopes for a big takeover premium warranted?

"The stock was already up 135 percent for the year, and so a takeover premium was already built in," he said.