Are Tech IPO’s the Only IPO’s?

Are tech IPO's the only IPO's?  We are all waiting for the tech kings and queens like UberPinterest and Airbnb to exit and while they may be taking their time it doesn’t mean IPOs are dead. On the contrary, they are alive and very well especially in the consumer space.

Food brands like Shake Shack and Papa Murphy’s have hit the scene with full force, and you have premium pet food like Blue Buffalo and retail establishments like Party City that haver also hit the markets.

Today’s consumers are looking for personalized brands that resonate with the things they consider important.  Many are flocking to health and nutrition, and this is a trend that is not letting up.

Companies today are looking at the millennials as their inspiration.  Not that millennials have the answer it is they are the answer.  For companies to make it today they must engage this generation as they are the generation that will be the prime consumer going forward, and it is important to understand that.  .

Looking at Chipotle, today one of the fastest growing food chains and most recognizable and successful restaurants in the space. 

That is a large difference and not an isolated one.  More recently you have had companies like Shake Shack, and even in today’s trendiest pet food brands, like Blue Buffalo, which started trading on the NASDAQ last month, with a $677 million IPO — the fifth-largest of the year.

These brands are taking a toll on the large food brands we have come to know and to date in 42 of the top 54 most relevant food categories the large brands have lost market share in the past five years, according to a report from banking firm Jefferies entitled “Food: The Curse of the Large Brand.”

Profitability Versus Hype

Consumer brands are beating the tech companies to the stock market because they are making money and this is always attractive for investors, especially later stage investors.

Many of the tech companies today just are not turning a profit.  Sure they may be worth billion on paper but in the end they need to monetize their businesses to a point they can be solvent without more raises.  Valuations are another issue.  Tech companies typically carry enormous valuation making it more difficult to raise money ion the public market.  All of these variable make consumer brands even more sexy to the investment community.

While there is a bubble brewing and even beginning to pop in the tech space, there’s no bubble in consumer. There will continue to be a more stable setting for consumer brands as they are valued on fundamentals, not hype.

  So all the advice about buying companies you like is crap and will get you hurt.  Look for companies everyone else likes and dig into them as best as yu can.  Make a decision based on what you see not what you feel.

 

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