The Interesting New Companies
Hitting the Marketplace
Monday, January 10th, 2011
By Mitchell Clark, B.Comm. for Profit Confidential
With the exception of mining stocks that move commensurately with the underlying spot prices of precious metals, the trading action in a lot of growth companies has been robust. Even recent initial public offerings (IPOs), which usually come to market expensively priced, are doing well in an environment where investors have no other choice but to be buyers of stocks.
Consider for example the recent IPO of Inphi Corporation (NASDAQ/IPHI). This small-cap semiconductor manufacturer recently sold 6.8 million shares of common stock at $12.00 per share. The company also granted the underwriters an option to sell another 1.02 million common shares to cover over-allotments.
This growth stock opened around $15.50 per share, pulled back to just under $15.00 per share, then accelerated smartly to the $19.00-per-share level. The stock just hit a new high of $21.94 per share and in my view is a fine example of how to bring a company to market. It wasn’t too expensive, and sentiment in the broader market was good enough to provide a strong opening for the stock. Very often, IPOs are overpriced and the stocks languish well after coming to market. Inphi and its underwriters seem to have got this one right.
There have also been a lot of very interesting Chinese new listings on American stock exchanges. If you follow U.S.-listed Chinese shares, you’ll know that the entire sector has been under pressure due to weakness in domestic Chinese equity prices and concern about accounting standards. The results of all this are some tremendous values in the marketplace. Along with the mining sector, Chinese companies are very much worth following if you’re an equity speculator.
One interesting IPO that recently began trading on the New York Stock Exchange is Noah Holdings Limited (NYSE/NOAH). This early-stage company recently sold 8.4 million American Depositary Shares (ADS), with two ADS representing one ordinary share. The offering was priced at $12.00 per ADS, with net proceeds from the sale of approximately 91.2 million dollars.
This growing small-cap is a distributor of wealth management products to high net worth individuals in China. The company distributes over-the-counter wealth management products that originate in China, including fixed-income products, private equity funds and securities investment funds. The company has over 300 salespeople in 28 branch offices throughout China.
Now trading around $18.00 per share, the stock is developing a solid following from Wall Street. The company is going to use its IPO funds to open new branch offices, upgrade its information technology infrastructure and create new investment products for sale.
If the broader market can keep itself together, we should see a lot more interesting IPOs like these hit the marketplace. I plan to look into all of them.
Right now, investors are trying to figure out where the economy, employment and the stock market are headed. They’ve already bought a lot of stock going into fourth-quarter earnings season. Now we’re due for a consolidation.
Next Post: What’s Happening in the Markets
So Far in 2011
Previous Post: Interest Rates: Why They Have to Rise
Tags: Ahead of the Street, initial public offerings, Inphi Corporation, institutional investors, investment ideas, investments, IPOs, new Chinese listings, Noah Holdings Limited, stocks, trading action, U.S.-listed Chinese shares, US listed Chinese stocks
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
