Still No New Investments

I check the listing of IPOs (Initial Public Offerings) listed by Charles Schwab (where I do my investing) just about every day, looking for the next Intrepid Potash that earned me a 50% return in one month. So far, my luck has been non-existent.

In my last post, I told any of you that were thinking of investing in Kar Auction Services, Inc., to not invest in that stock, and I have the same advice for any thinking of investing it the two most recent IPOs listed by Charles Schwab. Team Health Holdings, Inc. (proposed symbol THM), and Cobalt International Energy, Inc. (proposed symbol CIE).

Why am I not recommending either of these stocks? Quite simply because both companies are carrying a shitload of debt, and neither has the track record or promise of future earnings to justify the risk.

If THM sells all 20 million proposed shares at the maximum price of $16, the roughly $320 million raised in this offering will mostly go to paying of certain indebtedness, including an interest bearing note of 11.25%. I'm sorry, but when a company sells stock to expand it's business, that's a good thing. When they sell stock to pay off debt, that's a bad thing.

The other company, CIE will be using the money raised (roughly $1 billion) to expand oil exploration and exploitation of deep water, off-shore sites, but, in the company's own words (found in the preliminary prospectus);

"We have no proved reserves and areas that we decide to drill may not yield oil in commercial quantities or quality, or at all."

So, my answer to both companies is, "I will not be buying your stock in this initial public offering. There are just to many uncertainties and you are both to risky for my blood."

For now, I'm sticking with my short-term treasury bills, my dividend paying stocks, and my two mutual funds. They may not be exciting, in fact they're downright dull, but I can sleep at night.