Upside for Retail?

• Ian Wyatt
• On 5:20 pm EDT, Wednesday October 7, 2009

One of the IPOs we've been expecting came out today. Verisk Analytics (Nasdaq: VRSK) was apparently offered at $22 for the lucky investors who were able to get their orders in pre-IPO. For the rest of us, Verisk Analytics opened at $26.41 and finished the day at $27.85. That's a nice gain for those that got the pre-IPO price. But on the day, only 5% gains were attainable.

The two IPOs we were looking for today have apparently been delayed. We'll look for Omeros Corp (proposed symbol OMER, expected to debut in the $10-$12 range) and Mistras Group (proposed symbol MG, expected to debut in the $14-$16 range) tomorrow.

High-end retailer Talbot's (NYSE:TLB) made the Top Gainers list with a 16% move on an analyst upgrade. The Friedman, Billings & Ramsey analyst gave the stock a $13 price target, a significant step up from yesterday's close at $9.56.

Now, retailers (other than Wal-Mart (NYSE:WMT)) have been laggards for the most part. It's easy to see why. High unemployment has crushed spending and retail sales are way down. And so are the stock prices.

While the upgrade for Talbot's cites company specific reasons for the higher price target, it could also be a sign of better times for retail stocks. I'm sure this is a trend we could all enjoy, as they are some compelling values in retail stocks. I'll be adding retail to the sector trends we're watching.

I've now watched Vonage (NYSE:VG - News) hit the Top Gainers list twice in the last few days. Today it was up 38%. I ignored it the first because I hate the stock. I remember the hype surrounding its 2006 IPO. I had it pegged as a good short, because the business model just didn't seem compelling. Unless you're a cell phone company, nobody cares.

But interestingly, the reason Vonage is moving has to do with cell phones. Owners of iPhones and Blackberries can download a Vonage app that will allow them to make International calls using Vonage's Voice over Internet Protocol (VoIP) technology.

There's not much special about VoIP, but this app that allows cell phone users to use VoIP is interesting. It will save users money, for one thing.

I still have a hard time getting behind Vonage as a long-term investment. That's because voice services become commoditized and that drives prices and profit margins lower. But Vonage's first mover status on VoIP for cell phones may well drive the stock higher in the short term. 

Ian Wyatt is the Chief Investment Strategist of SmallCapInvestor PRO (http://pro.smallcapinvestor.com) and author of the book, "The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks." You can learn more about his book at http://www.smallcapbook.com.

Buzz up!