GARY ON THE IPO MARKET
“Investors face IPO frustration, missed earnings fuel market skepticism.” Out of the USA Today front page. “Initial Public Offers are supposed to be a great opportunity for investors to jump into the ground floor of the next big thing. But, it turns out that investors may be buying into companies that are about to disappoint and can’t keep up with expectations. So far 165 of 244 companies that sold shares to the public for the first time between the second quarter of 2013 and the first quarter of 2014 including restaurant chain Noodles, water park Sea World and gaming company King Digital have missed earnings’ expectations at least one quarter.”
So, here is my dissertation again. Please listen carefully. The IPO market is your best friend and can also be your biggest enemy. Listen carefully. The biggest winners of the next 20 years, of the next 10 years will come from Initial Public Offerings. There may be some that go up 50 fold if not more. Seriously, we can go back through history. There have been many of them, companies that started with 20 million in revenues and ended up at 10 billion in revenues if not more. But, on the other end of the spectrum is the opposite. Unfortunately, Wall Street very often brings out a lot of ka-ka and I am not equating Noodles and especially Sea World because I love that place, with ka-ka. I’m talking about the ones that are being foisted upon you with big losses and some with no sales. Once a month I go through the recent IPOs. I go to their websites. I check out the companies. If they are retail or a restaurant I go visit them. If it is something that goes into an Apple IPhone, I want to know about it. Then I strip away the crap and that is easy to do and I watch the ones that I think I have the makings. Companies that are growing have great earnings or maybe they are losing money right now but they are growing big sales and estimates are for them to start making money. But, I will stay away fromthe 18 billion dollar market cap with a 100 million in sales and losing 90 million on that 100 million. It is simple logic. Stocks like that have gone up big in the last year and they have also gone down big. So, I just want to make note of this again. I think probably in the future, I’m going to do a better job with you guys about talking more about IPOs, companies that just came public. In fact, what we may do is what Investor Business Daily does is highlight an IPO maybe once or twice a month, especially one that is showing itself with the goods.
good insight. thanks for your expertise. ibd does. a fine job with ipo analysis and i have been investing more of my clients money in the featured ipo stocks. has worked out well so far. presently putting 15% in chinese equities of which about half are ipo’s. ipo’s aside i have held tough with jazz and act and they seem to be on the upswing. been fighting against ibd suggestion to hold only 6-8 stocks and treat them as your only holding vs. 20 plus but have seen the benefit of the approach. have a great day gary.
“In fact, what we may do is what Investor Business Daily does is highlight an IPO maybe once or twice a month, especially one that is showing itself with the goods.”
I like this idea, Gary. I say go with it.