There's a boom under way among intriguing companies new to the market -- including the one that makes those glasses we couldn't see 'Avatar' in 3-D without.
If you found yourself wearing funny-looking glasses to be wowed by the record-breaking film "Avatar," you took part in one of Hollywood's hottest trends.
And what do that movie's blue aliens have in common with the animated heroes of "Toy Story 3" and a host of other hit characters in recent movies? You need those glasses to see them in 3-D.Click graphic to see interactive chartRealD This 3-D boom is changing moviegoing. And it has made RealD (RLD, news, msgs), the company behind those glasses -- and the equipment used to put 3-D characters on the big screen -- one of the more intriguing companies to hit the market in 2010.
In fact, while most of the buzz about initial public offerings in 2010 has focused on General Motors and Facebook, there's an IPO boom under way among less widely known names. The June launch of electric-car-maker Tesla Motors (TSLA, news, msgs) did get a lot of attention, but many smaller names have been overlooked.
The biggest IPOs in history
That's still below the pace of the 214 to 276 IPOs a year we saw during 2005-07 and certainly well under the 400-plus a year during the late-1990s tech boom.
But the numbers look very good for a couple of reasons. First, a cautious market has kept weaker companies on the sidelines. And second, that leaves the IPO stage open for solid companies with significant products -- such as those glasses, which seem headed for a lot more theaters.
Here's a look at the current IPO market and some of my favorite plays. It's not easy to emerge The late-1990s lust for new offerings created a number of stocks that flew briefly and then fell flat, such as Pets.com or online currency company Flooz.com. (There's still a Pets.com website, but it's run by a different company.)
Today, a much more cautious investing climate acts as a kind of screen.Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 300, 213, {"configCsid": "MSNmoney", "configName": "player-money-articles-16x9", "player.vcq": "videoByUuids.aspx?uuids=7a1add3d-6312-40a2-bb5d-83fa25888f4a,aacf0b11-b8e9-4007-aeef-0e07fcfe0b44,abf491aa-c8fb-43a8-9b62-168a3c512a1b,4795f1b0-f958-4457-85e1-e25d9bf21a79,49f961d4-10eb-448d-86de-d859367dd040,64a7ca25-bc75-4790-8df1-bcc863a44523,7c904380-da24-4d0e-88c1-93fdc919c8fe,4554cb1f-459a-4bdd-b780-b69f8767803d,a13ee901-9ef6-46b1-9317-e96198293261,0a0112c3-8021-48f6-8f99-91085e8b928f", "player.fr": "iv2_en-us_money_article_16x9-Investing-CompanyFocus"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=7a1add3d-6312-40a2-bb5d-83fa25888f4a,aacf0b11-b8e9-4007-aeef-0e07fcfe0b44,abf491aa-c8fb-43a8-9b62-168a3c512a1b,4795f1b0-f958-4457-85e1-e25d9bf21a79,49f961d4-10eb-448d-86de-d859367dd040,64a7ca25-bc75-4790-8df1-bcc863a44523,7c904380-da24-4d0e-88c1-93fdc919c8fe,4554cb1f-459a-4bdd-b780-b69f8767803d,a13ee901-9ef6-46b1-9317-e96198293261,0a0112c3-8021-48f6-8f99-91085e8b928f;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');"It's hard for companies to get an IPO done if they are not solid, with decent financial metrics and a good growth outlook," says Nick Einhorn, a research analyst at Renaissance Capital, an independent IPO research firm. "We have seen a lot of deals postponed or withdrawn because investors are being selective."
(For a great, comprehensive overview of what's still slated and what's been withdrawn, see the "IPO Home" area of Renaissance Capital's website.)
Sure, there are unusual companies scheduled to go public in today's IPO miniboom. There's Zheng Hui Industry, which sells frozen duck in China. Another, IronPlanet, provides an online marketplace for used heavy equipment.
But to launch an IPO in today's investment climate, companies have to sell real products and have real track records of respectable revenue growth -- if not profits just yet.
Besides RealD, some of the most attractive IPOs this year include CBOE (CBOE, news, msgs), an options exchange; Gordmans, a Midwestern discount retailer; and Smart Technologies (SMT, news, msgs) and Qlik Technologies (QLIK, news, msgs), which offer attractive high-tech products.
And that frozen-duck company? I think it stands a good chance of rewarding investors as a play on higher meat consumption by an emerging Chinese middle class. It's not the '90s anymore Simply put, today's IPO market is very different from the crazed days of the late '90s, in ways that make it safer and saner for the average Joe.
Yes, a few IPOs have done exceptionally well in their early days this year, such as Tesla and financial-products company Primerica (PRI, news, msgs). But these aren't the insta-millionaire IPO days of the tech boom. Average first-day gains have been a modest 5%, compared with 72% in 1999, according to Renaissance Capital.
This may be bad news for the insiders, venture-capital firms and hedge funds that benefit most when IPOs soar in their first days of trading. But it's good news for average investors who don't have the connections to get in early and are stuck buying at inflated prices.
And it means average investors who are patient can get shares of promising IPOs at prices at or below where the banks brought them public. Indeed, in today's volatile market, it can pay to wait for an IPO to trade back down to something close to that offering price. The offering for Tesla offers a good example: It hit the market at just about $19 a share, traded as high as $32 and has settled in just above $20.
Just as in the late '90s, companies in rapid-growth sectors such as tech and health care dominate the IPO slate. But consumer-oriented and business-services IPOs are actually doing the best, up 12% and 11%, respectively, on average, says Renaissance Capital.
To me, these newly public or soon-to-be public companies look most interesting:RealD's revolution As popular as 3-D movies are becoming, RealD hasn't reported profit. But the potential is obviously there. This company's technology is so good that it has been used to pilot the Mars Rover and power the visual displays in fighter jets.
First rolled out in movie theaters for the 2005 movie "Chicken Little," RealD systems now light up more than 6,000 theater screens in 51 countries. There are about 149,000 theater screens worldwide -- a number that shows the potential growth ahead, even if all theaters aren't converted to 3-D, of course.
RealD also wants to move 3-D into the home for use in TVs and video games. So it is partnering with consumer-electronics giants such as Sony (SNE, news, msgs), Samsung, Panasonic (PC, news, msgs) and Toshiba (TOSYY, news, msgs).
The big risk for investors is that 3-D could be just a fad. "That's not decided yet," says Scott Stevens of Strata Capital Management in Beverly Hills, Calif. But if the trend holds, he believes the company has a great business model because it gets recurring revenue in the form of a piece of 3-D movie ticket sales. Opt in to CBOE? CBOE adds a third dimension to investing by providing the largest U.S. exchange for options -- contracts that give investors the right to buy or sell stocks, exchange-traded funds and stock market indexes at prearranged prices.
Options trading is getting more popular. The number of options contracts changing hands has grown about 25% a year over the past five years. CBOE handles about a third of the trading volume in U.S.-listed options. It also offers some of the most liquid options contracts, and it has exclusive rights to offer options on some key indexes, including the S&P 500 ($INX) and Dow Jones industrials ($INDU).Click graphic to see interactive chartCBOE These are all good reasons to buy CBOE stock, says Stevens, who is worth listening to because Strata Capital Management's investments are up about 5% this year, compared with slight gains for the market overall. He says to consider buying the stock if it trades down near $26. It closed Tuesday at $27.25.
I get a confirming positive signal on this stock in the form of strong ratings at the money management shop Validea, whose models mimicking Peter Lynch and other investing gurus regularly outperform the market. CBOE gets solid ratings in Validea's Lynch model in part because the stock has a price-earnings-to-growth, or PEG, ratio of 0.83. Lynch has written that stocks with a PEG ratio below 1 represent good value.
Continued: Gordmans ready to goMore from MSN Money
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Sure, there are unusual companies scheduled to go public in today's IPO miniboom. There's Zheng Hui Industry, which sells frozen duck in China. Another, IronPlanet, provides an online marketplace for used heavy equipment.
But to launch an IPO in today's investment climate, companies have to sell real products and have real track records of respectable revenue growth -- if not profits just yet.
Besides RealD, some of the most attractive IPOs this year include CBOE (CBOE, news, msgs), an options exchange; Gordmans, a Midwestern discount retailer; and Smart Technologies (SMT, news, msgs) and Qlik Technologies (QLIK, news, msgs), which offer attractive high-tech products.
And that frozen-duck company? I think it stands a good chance of rewarding investors as a play on higher meat consumption by an emerging Chinese middle class. It's not the '90s anymore Simply put, today's IPO market is very different from the crazed days of the late '90s, in ways that make it safer and saner for the average Joe.
Yes, a few IPOs have done exceptionally well in their early days this year, such as Tesla and financial-products company Primerica (PRI, news, msgs). But these aren't the insta-millionaire IPO days of the tech boom. Average first-day gains have been a modest 5%, compared with 72% in 1999, according to Renaissance Capital.
This may be bad news for the insiders, venture-capital firms and hedge funds that benefit most when IPOs soar in their first days of trading. But it's good news for average investors who don't have the connections to get in early and are stuck buying at inflated prices.
And it means average investors who are patient can get shares of promising IPOs at prices at or below where the banks brought them public. Indeed, in today's volatile market, it can pay to wait for an IPO to trade back down to something close to that offering price. The offering for Tesla offers a good example: It hit the market at just about $19 a share, traded as high as $32 and has settled in just above $20.
Just as in the late '90s, companies in rapid-growth sectors such as tech and health care dominate the IPO slate. But consumer-oriented and business-services IPOs are actually doing the best, up 12% and 11%, respectively, on average, says Renaissance Capital.
To me, these newly public or soon-to-be public companies look most interesting:RealD's revolution As popular as 3-D movies are becoming, RealD hasn't reported profit. But the potential is obviously there. This company's technology is so good that it has been used to pilot the Mars Rover and power the visual displays in fighter jets.
First rolled out in movie theaters for the 2005 movie "Chicken Little," RealD systems now light up more than 6,000 theater screens in 51 countries. There are about 149,000 theater screens worldwide -- a number that shows the potential growth ahead, even if all theaters aren't converted to 3-D, of course.
RealD also wants to move 3-D into the home for use in TVs and video games. So it is partnering with consumer-electronics giants such as Sony (SNE, news, msgs), Samsung, Panasonic (PC, news, msgs) and Toshiba (TOSYY, news, msgs).
The big risk for investors is that 3-D could be just a fad. "That's not decided yet," says Scott Stevens of Strata Capital Management in Beverly Hills, Calif. But if the trend holds, he believes the company has a great business model because it gets recurring revenue in the form of a piece of 3-D movie ticket sales. Opt in to CBOE? CBOE adds a third dimension to investing by providing the largest U.S. exchange for options -- contracts that give investors the right to buy or sell stocks, exchange-traded funds and stock market indexes at prearranged prices.
Options trading is getting more popular. The number of options contracts changing hands has grown about 25% a year over the past five years. CBOE handles about a third of the trading volume in U.S.-listed options. It also offers some of the most liquid options contracts, and it has exclusive rights to offer options on some key indexes, including the S&P 500 ($INX) and Dow Jones industrials ($INDU).Click graphic to see interactive chartCBOE These are all good reasons to buy CBOE stock, says Stevens, who is worth listening to because Strata Capital Management's investments are up about 5% this year, compared with slight gains for the market overall. He says to consider buying the stock if it trades down near $26. It closed Tuesday at $27.25.
I get a confirming positive signal on this stock in the form of strong ratings at the money management shop Validea, whose models mimicking Peter Lynch and other investing gurus regularly outperform the market. CBOE gets solid ratings in Validea's Lynch model in part because the stock has a price-earnings-to-growth, or PEG, ratio of 0.83. Lynch has written that stocks with a PEG ratio below 1 represent good value.
Continued: Gordmans ready to goMore from MSN Money
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