3 Recent IPOs Worth Considering for the Long-Term: Phillips 66 (PSX)

A few alarms go off as Five Below, like many low-price retailers in history, has a major issue with profit margins.  Their most recent quarter was under 1%, and it fluctuates quarterly.  Their latest statement of operations show they had much higher net sales for 2012 over 2011 for the first 39 weeks, but net income took a huge hit, going from $3.6 million (2011) to just $819,000 (2012).  This was due to a jump in selling and administrative expenses, as well as cost of goods sold.  Five Below actually reminds me a lot of Steve & Barry’s, which was an American retail clothing chain famous for huge discounted merchandise.  Their business model was to undercut all competitors, including national chains like Wal-Mart Stores, Inc. (NYSE:WMT) and Target.  Target?  Could Five Below just be another Steve & Barry’s in the making?  Maybe that is why insiders and backers sold just over $400 million worth of stock a couple of weeks ago.

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Takeaway

Business Insider ranks the best IPOs of all time by looking at which companies grew 1000% the fastest.  Carlyle, Phillips 66, and Five Below won’t make any list like that since the champ, eBay Inc (NASDAQ:EBAY), did it in just 2 quarters, going from a market cap of $1.81 billion to $16.6 billion in less than a year.  However, while the 3 companies discussed in this article won’t set records, they can set your portfolio on the right track.  If I were to rank based on risk, Phillips would be least risky and most consistent, but carries with it the least reward.  Carlyle is more of a wild card, and you will never quite know or understand how they are making their money from quarter to quarter and have little to guide your predictions of where the stock price will go.  Five Below is most risky, but their industry is trendy and it could turn on a dime to go much higher.  However, they might need to change the store name in the future if they wish to improve profit margins.

The article 3 Recent IPOs Worth Considering for the Long-Term originally appeared on Fool.com and is written by Michael Carter.

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