It's a big week for initial public offerings, and more are coming. Finally, it looks like IPOs are starting to catch up with the market. This was a big week for IPOs, in terms of number and how well most of them did. Six companies went public this week, and about $1.5 billion was raised.
Four of the six increased the number of shares offered, or priced above the expected range, or both. That is bullish. You don't see this type of activity in a bear market.
For the first quarter about $7.8 billion was raised, according to John Fitzgibbon at IPO Scoop. That is much better than the first quarter of 2012, when $5.9 billion was raised.
The IPO market is a follower, not a leader ... but it's catching up.
And there are more coming. Seven IPOs are on tap for next week, looking to raise $1.9 billion.
Another big one was just announced: HD Supply Holdings (12 percent owned by Home Depot) filed for a large ($1 billion) IPO. The company went private for $8.5 billion in 2007.
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Two IPOs priced overnight: Payment processing company Evertec (to be traded under the symbol "EVTC") priced 25.3 million shares at $20, the high end of the price range of $18 to $20 a share, while Rally Software ("RALY") priced 6 million shares $14. That is above the initial share count of 5.75 million and above the price talk of $11 to $13 a share. Rally provides cloud-based systems for Agile software development projects, which is a methodology for best practices in developing software.
1) JPMorgan Chase: Poke all the holes you want. It continues to hit the numbers, and it's got a ton of money. The usual pundits are coming on, complaining about "earnings quality." They do this every quarter. You can say it's making its numbers because it is releasing reserves, you can say it's because it is cutting costs, but still. JPMorgan is making its numbers. Yes, low rates hurt margins, but we've seen that for three years and guys are still finding ways to make money.
It is also planning to raise its dividend...it now has a 3.2 percent dividend yield, and is continuing to buy back stock.
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JPMorgan current earnings estimate for 2013 is about $5.50 a share; it could do $6 a share. That's 8.3 times earnings, with a 3.2 percent dividend. That's not awful.
JPMorgan has something like $21 billion in reserves it can release. It can buy back stock, increase its dividend, and still get to 9 percent Tier One capital.
And if there is any hint that rates are going to go up, this company will explode.
2) Everyone's getting bearish! What's up with sentiment? Lots of talk last night about the huge plunge in bullish sentiment for the weekly AAII Investor Sentiment Survey. Bullish sentiment is at 19.3 percent for the week ending April 10, down 16.2 points from the prior week, the lowest level since March 5, 2009.
Wow. The historic average is 39 percent. Bearish sentiment went to 54.5 percent, up 26.3 points from the prior week, the highest pessimism level since July 8, 2010. Some are noting that there was an unusually low level of respondents this week ... maybe the bears are just more motivated!
3) Finally, a downgrade of two big consumer names. It's been quite a ride for big consumer names this year. Coca-Cola has gone from $36 to $41 a share, PepsiCo has gone from $68 to $80 a share this year and is at an historic high. Today Davenport downgraded both to "neutral" on valuation, but also noted that for Coca-Cola was likely "weaker than expected."
It certainly is a bit of a mystery why these stocks have been flying: Coke had only 1 percent volume growth in the fourth quarter of 2012 and is trading at roughly 19 times forward earnings. Pepsi is trading at 18 times forward earnings.
3) Gold collapses, breaking to near 12-month lows.
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