I-P-Oh No …

Are stocks in a bubble?

A strong stock market, low interest rates, and confidence in the ability of innovative companies to generate sales are heating up the market for initial public offerings. Especially tech stocks. When I read about IPOs for Candy Crush, the addictive mobile app, or Godaddy, the web-site registration firm best known for its edgy Super Bowl ads, I start to wonder.

There were 25 tech IPOs in the fourth quarter of 2013, compared with 8 in the fourth quarter of 2012. Many investors remember the heady days of 1998 and ‘99, when someone with an idea and not much more would go public. Back then it was anything dot-com related; now it’s cloud-based technology that’s in the spotlight—cloud-based payrolls, cloud-based call-centers; cloud-based trade-management.

Is it different this time? Back then, the average listing firm had been in existence only 4.5 years; now they’ve been around 13 years before they go public. At that time they often went public to raise primary capital; now they list so they can offer stock options to lure engineering staff. And there were 457 IPOs in 1999—more than twice as many as last year.

The witches in Macbeth chanted: “Double, double, toil and trouble, fire burn and cauldron bubble” as they brewed up their potion of disaster. Let’s hope the market isn’t brewing of a cauldron of trouble for investors now.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2014-03-17T10:35:24+00:00 March 17th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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