Chewy and Beyond Meat Spotlight Sizzling IPO Opportunities
You’ve met our new initial public offering (IPO) analyst Hudson Cashdan on Market Talk. And today he’s going to tell you about an incredible pet-supply company IPO launching Friday that has generated an incredible buzz.
Also, check out my chat with Hudson on the phenomenon that is Beyond Meat — this year’s hottest and most talked about IPO.
To check out our chat on Beyond Meat, click on the video below.
Beyond Meat Discussion
Nick Tate: Hello, friends. Nick Tate here Senior Editorial Manager with Banyan Hill’s Bold Profits team. I am joined today by our IPO Specialist, Hudson Cashdan, to talk about the hottest IPO of the year — at least so far. That is Beyond Meat, the makers of the famous Beyond Burger.
Hudson, this stock has really just taken off. It went public May 1 and shot up 163% the very first day. Now, here we are a month and a half later and it’s up more than 400%. Unusual isn’t it, for a stock to rise this high and exceed expectations by this much?
Hudson Cashdan: It’s certainly not every day this happens, but it does happen when you’re dealing with a story stock. What I mean by story stock is Beyond Meat is inventing a whole new market. Meatless meat is not really something that everyone knows about yet, but neither was online shopping when Amazon got started and look where Amazon is now.
Right now we think there’s a huge discrepancy between the bulls and the bears with how accepted this product is going to be and how large the market is. Right, frankly, the bulls are winning.
Nick: I have to ask a personal question. You have not tried it yourself, have you?
Hudson: I have not and I don’t plan to, but I’m not the target market for Beyond Meat. The beautiful thing about this country is there’s 350 million people or so and we’re all free to make our own consumption decisions. Many of them will choose a meat alternative for ethical, environmental or health reasons.
That’s their choice. I read the other day that there’s 40 million people in this country who are either vegetarian or vegan. That’s a big market as far as I’m concerned.
Nick: No doubt about it. Beyond the people who identify as vegan or vegetarian, there are millions more who are cutting back on meat just because they want to. I was reading survey results that showed something like two out of three Americans are cutting back on meat, at least a little bit.
With millennials it’s even higher. It’s seven or eight out of 10 because they are looking for a healthier protein source. Full disclosure, my wife and I actually have tried the Beyond Burger. My wife does not eat meat. She hasn’t had a burger in decades. I’m a committed carnivore and I liked it.
I think there’s a market out there beyond people who strictly do not eat meat. That’s a huge, and growing, market. When you’re sizing up an IPO, to what degree is the market, potential market and market growth factors in your decision and whether one is going to be a no-go or a superstar?
Hudson: Market growth is the key factor when we’re looking at the IPO market — at least the companies we’re targeting. They’re coming to the IPO market because they are doing something right. They have traction and they need capital to grow to accelerate that traction. That’s why they’re coming to the market. We’re giving them the capital by investing in their IPO.
In return for that, they’re giving us a percentage in their upside. That’s how the market works and that’s what these companies are bringing to our investors.
Nick: Are there other factors that go into your thinking when assessing an IPO?
Hudson: Many IPOs represent a unique opportunity to get access to a pure play on a particular story. For instance, investors can invest in companies that do things they believe in or causes they care about. Beyond Meat is an example of that. People care about a health issue, an environmental issue or ethical issues surrounding meat.
They are very enthusiastic about investing in this and buying the product as customers. A lot of times you see customers are investors in the stock. I think that’s what you’re seeing with Beyond Meat. It’s the same thing you saw with Apple and Tesla. You have investor evangelists and I think we’re going to see that.
Greg Bohlen, who backed Beyond Meat, did so because he had a socially conscience global outlook. That was what motivated him. It’s done well for him. He bought 800,000 shares or so at about $4.2 million. Now, before the latest move, that was worth $70 million. His strategy of putting his money where his heart is really paid off for him.
Nick: Or where his mouth is, as the case may be with Beyond Meat.
I think that’s one of the cool things about IPOs. There was a time when the only opportunity folks had to invest was if they had a lot of money, they were venture capitalists. Now, you can invest in a stock that you believe in. As you said, Apple and Tesla. There are companies you feel really good about and you can be a part of them.
For me, it plays into this whole idea of doing well financially by doing good. If you’re investing in a biotech stock or a health stock that is pushing genetics or precision medicine or some of the trends we’re seeing. It really gives you that opportunity.
Do you think that’s why there’s so much excitement around IPOs right now? It’s one of the factors that give people a reason and an opportunity to jump in?
Hudson: It really does feel exciting right now in the IPO market. I wasn’t an investor in the late ’90s, but I remember the late ’90s. Between 1992 and 2000, we averaged 450-plus IPOs per year. In 2017, it was only about 108. This year we are expecting 200.
With a lot of big winners coming that have already come to market and those we expect to come in the near future, we think the IPO market is going to create a big buzz. That’s going to precipitate more IPOs coming to the market. We think we’re going to surpass the late 90s IPO volume.
I think IPOs will once again be the topic of conversation around water coolers and on the golf courses at the country clubs by the end of this year.
Nick: I think you’re right. I think there’s no doubt that there’s that kind of excitement. What you’re really talking about is that we’re on the brink of a historic year for IPOs getting back to those big numbers we used to see in the 1990s.
We’ve talked about tech a little bit — we talked about biotech. Are there segments of the industry or certain types of companies that you think are going to be very successful in trying to go public? Are there segments we’re more likely to see these breakout stocks like we’ve seen with Beyond Meat and others this year?
Hudson: We think tech companies generally are going to be where a lot of the IPO action is. In the late 90s we had a huge number of IPOs and it went down since then. It’s starting to come back, but it’s not back to where it was before. There’s a backlog. The last decade we saw VCs pouring money into technology companies.
Those companies are in venture capital portfolios. Those venture capital firms have to realize that and get those into the market. That’s their business model. The reason they stayed private longer — right now we see companies going public have an average age of 11 or 12 years, versus eight years in the late 90s.
Part of the reason for that is because the regulatory environment has become burdensome. The cost of going public has risen. The cost of staying public, which is just as significant, also rose a little bit. Companies are staying private longer. Recently we’ve had a relaxation of those regulations.
We’ve had emerging growth companies, companies that are a little bit smaller but fast growing. They get some relief from some of the burdensome regulatory demands. Now you’re seeing a lot of those companies come public. With that, you’re going to start seeing some success. You have big names like Uber, and I think Slack is going to be a big one and companies like Beyond Meat.
This buzz and these big names coming are going to be pioneers. They are going to blaze the trail for the rest of the backlog of tech companies coming to the market. It’s going to be a good couple of years. Eventually too many companies will come to the market, but we’re way early for that. We’re going to have several good years before we’re at the point of 2000 when too many companies are coming to the market.
Nick: It seems to me like we’re in a nice pocket of opportunity for investors. I know that you and Paul Mampilly and the rest of us at Bold Profits are putting the finishing touches on a special event we’re going to be rolling out in the next week or two telling people about a new service we’re offering that will help them take advantage of what’s coming on IPOs.
It’s a subscriber service, so I don’t want you to give the store away, but tell us a little bit about your plans, what you’re thinking and what people can expect.
Hudson: We’re going to show you a lot of what we’re doing behind the scenes when we’re researching these IPOs. We’re going to explain why we like them and why we’re buying them. We’re going to talk about some of the hot ones that are coming in the near future and keep you up to date on them. We’re going to give you a look inside our heads as we analyze them in real time.
Nick: We look forward to that. Hudson, thanks for being here. A lot of great analysis on what’s happening in this IPO market. Thanks for joining us.
Hudson: Thank you, Nick. I look forward to continuing this dialogue.
Nick: That’s going to do it for us today. Thank you for joining us. Before I go, I just want to remind you that if you like what you see here, share us on Facebook, like us on Facebook, share us on your favorite social media. Subscribe to our YouTube channel. Keep an eye out for updates because we’re keeping an eye out for you.
Until next time, thank you for joining us. I’m Nick Tate. Bye-bye.
Until next week…
To your health and wealth.
Senior Editorial Manager, Banyan Hill Publishing