With three straight days of decent gains, investors seem finally to have shaken off the macro jitters they experienced in the wake of last week's Fed "surprise" announcement. Today, the S&P 500 (^GSPC 0.37%) and the narrower, price-weighted Dow Jones Industrial Average (^DJI 0.18%) rose 0.6% and 0.8%, respectively.
Consistent with those gains, the CBOE Volatility Index (VIX) (^VIX 5.23%), Wall Street's "fear index," has fallen three days in succession, with another 2% drop today, to close at 16.86. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)
Follow-up: Gold's fall unchecked
This morning, I warned investors that recent macroeconomic developments -- and the response in the price of gold -- suggest that the bull market in gold is dead. For now, there appears to be no respite in the fall, as the SPDR Gold Shares (GLD +0.02%) lost another 2% today.
I'm not much a fan of Jim Cramer, but I have to agree with him when he said this morning on CNBC that, "I look at these moves and I find them breathtaking," although I strongly disagree when he added, "I think gold has some value here." I think "breathtaking" is exactly the right word to describe gold's recent price action -- just as it applied to the magnitude of the bubble on the way up.
Is this the next Chipotle?
An article published this afternoon on TheStreet.com trumpets: "Miss Chipotle & Panera's IPO? Here's Another Chance." The "other chance" refers to tomorrow's flotation of Noodles & Company, a chain of fast casual dining restaurants specializing in pasta bowls.
At a time when some companies are pulling their initial public offerings [IPOs] due to the recent market volatility, investors are clearly hungry for Noodles' shares. On Tuesday, the company announced that it would likely raise the pricing range for the stock to $15 to $17, up from $13 to $15. The company, which owns and operates 276 restaurants as of Jan. 1, with an additional 51 franchise locations, generated revenues of $312 million over the trailing 12-month period ending April 2.
It's true that Noodles' chairman and CEO, Kevin Reddy, was formerly the chief operating officer of Chipotle Mexican Grill (CMG 1.80%) -- he was the first hire from McDonald's after the latter purchased a majority interest in Chipotle in 1998. Still, I think it's presumptuous to herald Noodles as the next Chipotle.
For one thing, Chipotle (and Panera) have net cash on their balance sheet; Noodles has net debt, to the tune of $99 million. In fairness, the company plans to use $66 million of the IPO proceeds toward paying down some of the debt. Furthermore, Noodles' gross and operating margins are only a bit more than half of Chipotle's (and Panera's.)
Foolish investors know that IPOs are a beauty contest and are, as a result, skeptical of the "value proposition." At the $16 midpoint of the new pricing range, shares of Noodles & Company would be valued at 52 times trailing normalized earnings per share, or 31 times tangible book value per share. In this case, that skepticism looks richly deserved.
