Four Better IPOs for 2012
Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Many 2012 IPOs don't look very attractive. The Fool's John Maxfield came up with a great description for several of these bad investments, zombie IPOs, and these companies might show enough life to trick some investors. Investors could avoid the zombies' debt burdens by buying into social media IPOs, but even a zombie restaurant chain still has cash coming in from diners. A social media company has to convince customers to open up their wallets in a market full of free online services. Even with these minefields around, I still found four recent IPOs that show promise.
Tilly's (NYSE: TLYS) still doesn't seem well known outside of Southern California, and it didn't have a CAPS rating when I made my original pick. After some notable events in August, a few more Fools saw Tilly's potential and this clothing chain had a 5 star rating recently. As the Associated Press reported, Tilly's received attention after a strong 2Q earnings report, driving Stifel Nicolaus to upgrade its forecast. Fool writer Matt Koppenheffer explained that Zumiez cut its own forecast recently, which led to a selloff even though Zumiez beat estimates. Zumiez' 2Q earnings report still seems like good news for Tilly's, and Zumiez may just be showing some caution.
Natural Grocers (NYSE: NGVC) doesn't have a CAPS rating yet, but the Fools who've found this store so far seem confident about its stock. I originally picked this store because it sells health food, but Natural Grocers also has another potential growth driver, its nutritional supplements. With recent store openings in Arizona and Montana, as well as more expansions coming up soon in these states, Natural Grocers seems well on the way to becoming a regional powerhouse. Natural Grocers prominently features food recall updates on its main website, which shows that this market doesn't cut corners on food quality.
AVG (NYSE: AVG) makes internet security software, including the well known AVG antivirus program, and many recent news stories have highlighted online security threats. Earlier this year, login credentials from several sites, including LinkedIn and Yahoo!, were stolen. Most recently, hackers broke into a FBI agent's laptop and released a million Apple device IDs, as an article by Tony Bradley at PCWorld explains. AVG is a Dutch company, but it does have a listing on the New York Stock Exchange. AVG did raise its guidance on August 1, although the company is trading below its IPO price at the moment.
Peregrine Semiconductor (NASDAQ: PSMI) hasn't attracted much attention from Fools yet, but it did just go public in August. Markus Aarnio, for Seeking Alpha, noticed that Morgenthaler Partners bought 200,000 shares at the IPO, a big contrast from some other 2012 IPOs where backers dumped as many shares as they could. Peregrine isn't profitable at the moment, but Yahoo! Finance does state that Peregrine has a 19.43 forward P/E, as well as 78 percent revenue growth for the quarter. David Johnson, at Benzinga, reports that Peregrine Semiconductor parts show up inside Apple iPhones, and Apple supplier Cirrus Logic has certainly performed well recently.
The Morgenthaler purchase suggests that Peregrine Semiconductor could be one of the few unprofitable companies worth buying, especially with Apple as a customer. Fashion can be fickle, but Tilly's has been around for 30 years, through several booms and recessions. Natural Grocers understands its customers' health concerns, which could help keep its loyal customer base growing. As more financial services go online, AVG could sell more antivirus software as internet security becomes even more appealing. All of these companies have strong competitors, and none of these companies are cheap, but Tilly's, Natural Grocers, AVG and Peregrine Semiconductor look much better than the other 2012 IPOs I've seen.
enovinson has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.