Wyatt Research Week in Review: Nov. 15-21

It was a red letter day for IPOs on Thursday, with two high-profile offerings finishing solidly in the green when the dust settled on the trading floor.
Let’s start with Match Group (NASDAQ: MTCH), a spinoff of media conglomerate IAC/InterActiveCorp (NASDAQ: IACI) which includes the popular dating sites/apps Match.com, OkCupid and Tinder.
Match had no shortage of love from profit-seeking retail investors.
It priced its initial public offering at $12 per share – the low end of its proposed $12 to $14 price range. The newly minted stock opened on the Nasdaq at $13.50, peaked at $14.89 and closed at $14.74 – a 23% gain from the IPO price.
Meanwhile in Lower Manhattan, Square (NYSE: SQ) was stealing hearts in its New York Stock Exchange debut.
The mobile payment company led by the brash Twitter (NYSE: TWTR) co-founder and CEO Jack Dorsey priced its IPO at $9 a share, well below its expected range of $11 to $13 per share. But like the Match love fest, ordinary investors hastily swiped up Square shares. The stock reached as high as $14.78 before nestling at $13.07 at the closing bell for a hearty 45% gain.
Many financial commentators – including Wyatt Research contributor Rebecca Bowden – had positioned the Square IPO as a litmus test for other billion-dollar tech startups seeking to raise capital through the public markets.
The results of that test seem to be: underwhelming response from IPO underwriters; overenthusiastic response from the investing public.
Even investors who believe in the underlying business models of Square and Match may want to play hard to get until the buying euphoria wears thin.
Here are some of my favorite Wyatt Investment Research articles of the week:
Nippon Rising: Time to Buy Japanese Stocks – Twenty-five years after the market bubble burst in Japan, corporate reforms and reinvigorated individual investors have made Japanese stocks worth a look. But how can the average person here in the U.S. play the changes in corporate culture going on in Japan?
Is This Billionaire Investor Brilliant or Crazy? – Hedge fund manager David Einhorn of Greenlight Capital has been a big buyer of Consol Energy (NYSE: CNX), the worst-performing stock in the S&P 500 over the past year. What’s more, he’s continually bought into a downward price trend. Does Einhorn see something the broader market doesn’t, or has he simply thrown good money after bad?
Icahn vs. Chanos: The LNG Hedge Fund Battle – Liquefied natural gas exporter Cheniere Energy (NYSE: LNG) has become a battleground stock for hedge fund managers Carl Icahn and Jim Chanos. Icahn is the largest Cheniere shareholder. He took a 6.54% stake in August and has since upped that stake several times. He now owns 12.65% of the company. Chanos, meanwhile, has called the LNG industry a “looming disaster.”
Are Any Copper Stocks Worth the Risk? – The price of copper is down 25% year-to-date and recently fell to a six-year low amidst escalating concerns of slowing economic growth in key emerging markets like China. For investors willing to take the risk, copper stocks may rebound if the underlying price of copper can simply find a floor. How long that takes is anyone’s guess, but one copper stock could be an attractive turnaround play.
Where to Find Safe, Double-Digit Yield in Real Estate – Most signs point to an interest rate hike when Federal Reserve officials meet on Dec. 15-16 for the final time in 2015. If we look at price action alone, it appears income investors view a rate increase with some disfavor. High-yield pass-through entities – real estate investment trusts in particular – must tap equity and debt markets to grow. But rising rates are also indicative of stronger economic growth. So while capital costs might rise, so will the price that REITs can charge for rent. Thus, many REITs actually hold their own in a rising-rate environment.
Buffett’s Big Moves in the Third Quarter – While Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B) doesn’t hold every investment forever – as is evident by its quarterly 13F filings – it was once again a net buyer last quarter.
How Bond Laddering Can Reduce Portfolio Risk – There are numerous portfolio diversification and risk management techniques, but one of the most useful when it comes to fixed income is the bond laddering strategy, in which an investor buys bonds with significantly different maturity dates.
Apple’s New Payment Service Could Spell Doom for PayPal, Square – The Wall Street Journal reported last week that Apple (NASDAQ: AAPL) is working on a peer-to-peer payment service, possibly through its iMessage platform. PayPal (NASDAQ: PYPL), which went public in July, and the newly public Square are both companies with business models built around making small amounts of money on peer-to-merchant and peer-to-peer transactions. If Apple walks in and offers their product for free, it could spell disaster for both companies.
Have a great weekend!