Rookie of the Year
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Mark McGwire was called up to the baseball big leagues in 1987. By the All-Star break he was unanimously chosen and given the title: Rookie of the Year. When you get a unanimous decision, there has to be something that stands out about the new kid. What was it with Big Mac? He wound up setting the rookie record by belting 49 home runs.
This year has been memorable so far when it comes to the exchange rookies. When these rookies make their debut, it’s not called getting called up, it’s called an IPO. We've talked a lot around here about how these new kids are doing now that they are in the major leagues, and it’s high time we awarded one of the Rookie of the Year honor. Allow me to present 5 candidates.
|Sandridge Mississippian Trust 2||4-18-2012||-4.28%|
As we get started, let's get one thing straight. Facebook (NASDAQ: FB) is only here on this list because we have to bring them up. I don't want to leave them out and then have someone tell me they should have been included. We had high hopes for them. They weren't just supposed to be rookie of the year; they were supposed to win the World Series for their team. Unfortunately all they have shown is that they are not Major League material. A dismal quarterly report followed by a ridiculous $1 Billion purchase of Instagram. Their stock price has suffered, losing nearly half its IPO value, and they still have a P/E ratio over 100. If you are looking for someone to hit you a home run, I wouldn't be looking towards Facebook.
Moving right along we have Splunk (NASDAQ: SPLK) with a solid effort. We got a better look at this company after they went public, and some good things stood out. Gross revenues are increasing significantly. The business that they are in has a lot of room to grow. Top line revenue looks good (up over 80% last year), but the bottom line still looks weak (down over 180% for the same period). Let's chalk it up to being a new company. Rookies often struggle out the gate. This may be a company that eventually turns that bottom line around, but up till this point in time, it's not a Rookie of the Year performance.
Sandridge Mississippian Trust 2 (NYSE: SDR) makes the list because of their prospectus. In their prospectus they outline their intended dividend distributions for the next 6 years (with a $20 stock price, dividend is about 10%). Sandridge's other royalty trusts, Sandridge Mississippian Trust and Sandridge Permium Trust, have delivered in line with their prospecti, and there's no reason to believe that this one won't deliver as well. The gas prices used in the prospectus to estimate dividends are pretty conservative. While dividends are good, the stock price itself has declined as the price of crude oil has declined.
Our only food sector nominee is Annie's (NYSE: BNNY). Known for their trademark bunny and health food focus, this has been a good performing stock so far. Things look good right now for Annie. In their first quarterly report they reported earnings increased by 20% and in line with analyst's estimates. Net income wasn't quite what they wanted, but that can be attributable to growing pains and extra expenses related to going public. Stock price has been good to investors so far. Definitely a good player, but not the company I've picked as my winner.
And the winner is...
The rookie of the year is teen and preteen retail store Five Below (NASDAQ: FIVE). This store markets their products to teens and preteens (insert the word "girls" in there as well) and sells their products for $5 or less. This is a neat opportunity. Think Dollar Store for kids. Mom and dad are much more likely to give in to buy something when that something is under $5. And even if mom and dad do hold their ground, $5 is relatively easy for a kid to come up with. Nice niche.
This is a growth story as well. They were able to open 51 new stores in fiscal 2011. Fiscal 2010 and 2011 saw gross income increases of 68% and 59% respectively. Net income was up over 100% for fiscal 2011. As they continue to add new stores and experience more growth, expect these number to continue rising. Maybe that's why they've been upgraded to a buy now by several firms.
I think that when we look at these 5 companies, this one is the total package, and why I believe it's the best opportunity of the bunch. But, there are several other companies that IPO'd this year that I didn't include. What do you think? Does someone else deserve this title?
thequast owns share of Mississippian Trust II. The Motley Fool owns shares of Facebook and SANDRIDGE MISSISSIPPIAN TR II COM. Motley Fool newsletter services recommend Facebook. 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.