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New takeovers may appear to have been few and far between with just one new entrant on our table this week, copper producer Weatherly International (WTI:AIM) which has been approached by an unnamed suitor. Closer analysis of stock market activities reveals a notable rise in preparatory work that could result in a takeover, namely stake building.

Quietly building up shares in a company is seen as a crafty way of launching a full bid. It gives predators a head start with gaining control and means there are fewer shareholders to win over.

Using stake building as a trading opportunity isn’t always easy. A takeover isn’t guaranteed, as a company or individual may buy shares in another business simply as an investment. Complicated trading vehicles such as CFDs can disguise the identity of a potential suitor, making it hard to even see when someone is stake building. The Financial Services Authority is under repeated pressure to change the disclosure rules (see Investors Champion, page 37).

Directors often buy stock to show faith in their business but cannot be ruled out from making a takeover, as director dealings have turned out to be, on many occasions, preparatory to management buyouts.

Taking these issues on board, what’s happened in the past week on the market? Two former directors of photo booth operator Photo-Me International (PHTM) continue to buy shares in the company and keep investors alert. As of last Friday, former chairman Dan David had built up a 10.2% holding and ex-director Philippe Wahl had snapped up 7.17%. Market speculation points towards an imminent bid for the business.

Oil group Dana Petroleum (DNX) has built up a 12% holding in rival operator Faroe Petroleum (FPM:AIM) and is thought to be on an aggressive mission to acquire more as a precursor to a possible bid. The shares jumped 18% to 167p last week.

Sainsbury (SBRY) jumped 7% to 380p on talk that investor Robert Tchenguiz had sold some of his stake to the supermarket group’s Qatari suitors. The Qatar Investment Authority is blocked from making another bid until May but could use the remaining time to increase its stake.

Hedge fund Centaurus Capital has picked up 4.037% of waste management group Biffa (BIFF) using CFDs. It is not expected to rival the existing 350p-a-share offer from Montagu, but rather invest with a view to making money should a counterbid drive up the takeover price.

Kairos Investment Management, another hedge fund, lifted its stake in gold exploration group Stratex International (STI:AIM) to 20.57%, reiterating its commitment as a long-term shareholder. While there isn’t anything sinister behind Kairos’s intentions, investors in cooker specialist AGA Foodservice (AGA) may want some clarification on Duke Street Capital’s plans. The private equity company continues to lift its holding in AGA, having last week taken its stake to 22.1%.