Buy These Stocks While They're New
The IPO market in 2006 wasn't hot, which we think created good buying opportunities.
During 2006, investor demand for initial public offerings (IPOs) was again fairly tepid: By our tally, about 200 companies went public--roughly the same number as the previous two years--but well below the overheated figures seen during the heady times at the end of the 1990s. Morningstar has been tracking the ranks of newly public companies for years, looking for businesses (and stocks) worthy of attention. But more recently, we've increased the amount of attention paid to the IPO market, and our analysts have taken a hard look at many of the firms that went public last year.
We bring the same research process to a firm regardless of its tenure as a public company, looking for firms with strong competitive positions and stocks trading well below our assessment of fair value. Because we have a broad array of industry expertise, we're able to put a new offering in proper industry context (though there are times when we have the opportunity to learn about new businesses--see Grupo Aeroportuario del Pacifico (PAC)). Since firms tend to go public when valuations favor the seller (a disadvantage to investors), we spend time thinking about why a company is going public and looking at demand for the shares shortly after the offering. MasterCard (MA) is a great example of a situation in which insiders were selling stock for reasons other than maximizing their returns. The banks that owned MasterCard were looking to raise funds to cushion against and separate themselves from potential legal liabilities.
Michael Hodel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.