• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Hot New Issues Course Through the Market

Several recent IPOs have been performing well, and that is definitely a good sign for the broad market.
By KEN SHREVE
Sep 09, 2012 | 11:00 AM EDT
Stocks quotes in this article: FIVE, PANW

Amid much skepticism about the health of the U.S. economy, the major averages broke out to the upside last week in heavy volume. Some called it more short-covering, but I don't agree with that. It was fresh money coming in from the sidelines, ready to move out of bonds and into stocks.

Buyers have the upper hand, and they'll mostly likely maintain that edge for the next few days. There's not much of a chance the bears will take meaningful short positions ahead of the two-day Federal Reserve meeting set for Sept. 12-13.

After Friday's disappointing jobs report, the odds have increased that we'll see some form of additional stimulus from Ben Bernanke and the Federal Open Market Committee Thursday. It's not a slam dunk, but it is more likely after the numbers revealed the economy created a disappointing 96,000 jobs in August.

When it comes to the action in individual stocks, leadership has broadened out nicely. Several growth names are doing exactly what they should be doing in the early stages of a market uptrend: breaking out in heavy volume.

The new-issue pipeline isn't exactly vibrant right now. However, several recently debuted stocks that have the potential to be new market leaders are acting well. Organic and natural foods distributor Annie's (BNNY) cleared a base last week; affordable luxury brand Michael Kors (KORS) continues to hold gains nicely after its recent breakout; and online professional network Linkedin (LNKD) broke out in heavy volume above $113.

Earnings season is pretty much over, but two innovative new issues that have enjoyed strong buying demand since their July initial public offerings are slated to report earnings Monday. Shares of specialty retailer Five Below (FIVE), with a market capitalization of $1.9 billion, have doubled in price since their July 19 IPO at $17. At the beginning of this year, the company operated 192 stores in 17 states, with plans to open an additional 50 stores in 2012.

It sells merchandise priced at $5 and below to the pre-teen and teen crowd, and business is booming.  The stock currently sells at a rich valuation, but the company's growth prospects make it worthy of a premium multiple. Annual profit this fiscal year is seen rising 47% to $0.44 a share. Next year, the consensus estimate calls for profit of $0.64 a share, up 45% from this year's targets.

On Monday, analysts expect it to report a profit of $0.01 a share, with sales expected up 32% from a year earlier to $81.95 million.

Five Under (FIVE) -- Daily
Source: StockCharts.com
View Chart » View in New Window »

Meanwhile, another red-hot new issue -- Palo Alto Networks (PANW) -- is also set to report Monday. The network-security firm went public July 20 at $42, nicely above an initially proposed range of $34 to $37.

The stock has market capitalization of $4.8 billion, and it continues to hold near highs. Quarterly earnings are expected to be flat compared with a year-earlier loss of $0.09 a share. Sales are seen rising 77% to $71.3 million.

Palo Alto Networks (PANW) -- Daily
Source: StockCharts.com
View Chart » View in New Window »

New issues are the lifeblood of any market rally. The fact that several are acting well doesn't mean a rip-roaring bull market is about to take hold, but it's a definitely a good sign, and a reason to be optimistic about a solid rally into the end of the year.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Shreve was long KORS and LNKD

TAGS: Investing | U.S. Equity

More from Investing

With XL Fleet, Options Are Your Friend in Order to Define Risk

Timothy Collins
Feb 25, 2021 2:37 PM EST

If the market stabilizes, I believe XL could excel to the upside.

Let Retrace Back to Nvidia After Earnings

Bruce Kamich
Feb 25, 2021 2:23 PM EST

Here's what the the charts are saying now for the tech company.

As Plug Power Plummets, There Appears to Be More Risk Ahead

Bruce Kamich
Feb 25, 2021 2:03 PM EST

Let's check out the PLUG charts as traders react to the latest EPS numbers.

Ring the Cowbell: Here Are Three Ways to Play the Jittery Market

Jim Collins
Feb 25, 2021 1:52 PM EST

Let's look at the move in bonds, how it will lead stocks -- and load the deck with some 'b-sides.'

Jim Cramer: The Bond Market Vigilantes Strike

Jim Cramer
Feb 25, 2021 1:41 PM EST

What does that mean for stocks? Consider Nvidia.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:31 PM EST PETER WILLSON

    Has the Short-Term Top Come for the XLF/Banks?

    The has triggered a long-term overbought signal ...
  • 10:10 AM EST GARY BERMAN

    DLTR: The Buck Might Not Stop Here, but I Am Looking for a Bounce

    Dollar Tree is trading inside our long-term boun...
  • 08:36 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 2/24/2021

    SPX (Long-Term View) The 2/16 HIGH @ 3950.43 is ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login