I'm always on the prowl for a potential bargain, and the end of the year can be an interesting time to go hunting. One place I've been looking is within the ranks of recent initial public offerings that have stumbled shortly after they've come out of the gates.
Typically, IPOs are surrounded by a lot of buzz and excitement, and that is reflected by the market's early reaction, which can push shares higher than they deserve. Sometimes this madness continues until there's a disappointment of some kind; perhaps the growth story was not as solid as investors believed, and investors move on.
This year has been a bit different, at least for some of the IPOs that have been interesting to me. I was intrigued to see the debut of grill maker Weber Inc. (WEBR) in August. As the owner of the same Weber grill for 20 years or so, I can't be more impressed about the product quality, so the IPO caught my attention. It was not a great debut, however. Shares ended up pricing at $14, below the expected $15-$17. While Weber breached $20 intraday by the third day of trading, its shares have been sliding since late October, falling from $18 on Oct. 21 to close at $11.50 Tuesday.
Last week while on vacation, I took advantage of the drop to the $12 range (or perhaps was taken advantage of) and initiated a position in WEBR. Shares currently trade at about 16.5x and 14.5x consensus earnings estimates for fiscal 2023 and 2024, respectively (September year-end), and those are multiples I can live with.
Last month, Weber initiated a four-cent quarterly dividend, which equates to a 1.4% yield, and it will be interesting to see how it manages this payout moving forward. I'd love to see the company increase that dividend while simultaneously buying back shares and reducing its debt (currently at about $1 billion), but that's a tall order.
The road from here is unclear, and WEBR's chart probably looks awful to my fellow Real Money columnists who are technicians, but I am in no hurry on this one. In addition, I am prepared to increase the position should the opportunity present itself.