Monday, November 7, 2011

The Battle of the IPOs.

There hasn’t been a good IPO lately. The market is volatile; even with a rally in October, investors are still in fear of any sort of bubble effect. Commentators also seem to reinforce the sentiment, vesting the reason, however, on fiscal responsibility. One thing everyone seems to agree: it can’t be business as usual with the recent MF Global disaster.

I have been watching the market closely for numerous reasons. One reason is that I had a tingling a few weeks ago about the time to invest and many signs point to now. Warren Buffet seems to also think so. Another reason is that I want to understand how corporate social responsibility is infiltrating the investment trends to get a sense of how much progress we’ve made in sustainability. I’ve noticed an increased chatter about ethical duties of economists, investors, along with more frequent news about supply chain responsibilities, settlements for human rights violations, and slow maturity of the Occupy movement. Intuition tells me which ever company has the kind of sustainable thinking aligned with popular paradigm shift will succeed in the long term. Regardless of how the Supreme Court will rule in the coming CSR decision on corporate liability under the Alien Tort Claims Act, I believe we have began a health transition process. 

With that in mind, I thought the recent Groupon IPO (GRPN) is overrated. First the company’s business model depends on blind consumerism – let’s crowd serve discounts so we can buy more. I saw their Super Bowl commercial and felt their message reflected an odd sense of over consumption mentality. Add that they do not market their ability to help integrate local businesses into the global economy, I fail to see how they can serve the market place in a health way. There also seem to be a host of competitors popping up against their profit stream. I doubt Groupon can maintain an flexibility enough to shed off companies like Living Social. This is a marketing issue alone, however, and I would stand corrected if Groupon modify their strategies. 

There is an IPO this week deserving of attention. Angie’s List (ANGI) provides social peer-to-peer social marketing to local commerce. Their focus is easily adaptable to many sectors of the economy, having recently entered the health care industry I see their potential expansion into local food culture and socially responsible businesses. Their model does not inherently conflict with sustainability like Groupon's, nor does it impede sustainability for the survival of the grassroots societies - Angie's List does not facilitate the kind of market trend that demands manufacturing race to the bottom, Angie's List ask the distributed small business to race to the top. It's profit stream is also rather unique, never really overlapped by another yet somehow ambiguously defined by many successes of other trends. I believe, this IPO deserves much attention in the shadow of Groupon's questioned IPO last week.   

There is also an established stock that also merits mention here. Pepsi (PEP), is, I think, one of the best stock to invest right now often cited as undervalued by about $10 per share. One because they have ramped up their efforts to help alleviate the world’s water problem and they have been socially responsible leading many aspects of corporate social responsibility (click here to see their 2010 CSR report). Sure they have pissed off some pro-life activists but my opinion is there is more to that story. So I withhold my judgment on their human rights records with a positive outlook. Pepsi also aligns with the popular paradigm shift with their “Refresh” project.

If you look at the company, it’s well diversified in the profit mechanisms; it’s dividend yield has been stable and positive for 39 years; it’s price to earning ratio is high; it has recently announced to sell more of its stock, perhaps to rally funds to make some aggressive market moves; and finally it has ramped their involvement in the Chinese beverage and snack food industry – a huge advantage with the rise of a massive Chinese middle class.

My two cents on the IPOs this month and positive signs of a health CSR environment emerging for the generations to come.

This post contained forward-looking information within the meaning of the Securities Act and the Securities Exchange Act, including statements that include the words "believes," "expects," "anticipate" or similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to differ materially from those expressed or implied by such forward-looking statements. In addition, description of anyone's past success, either financial or strategic, is no guarantee of future success. This post speak as of the date first set forth in the posts and I assumes no responsibility to update the information included herein for events occurring after the date hereof.

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