Two Low-Flying IPOs Offer Hope

"There isn't a chance in hell I would give you a nickel if you don't have a business card."

-- A potential investor in my fund after discovering I didn't have a business card.

Unfortunately, image and presentation are 90% of the job (even in investing), and perspiration and perseverance account for roughly 10%. The same holds true for stocks, as evidenced by the names of two companies -- U-Store-It (YSI - commentary - Cramer's Take), and Build-A-Bear (BBW - commentary - Cramer's Take) -- that have gone public in heavily oversubscribed offerings in the past month but have fallen under the radar. Although their names won't inspire marketing students, both businesses look like compelling investments.

One to Store Away

U-Store-It, which went public on Oct. 21 at $16 and now trades around $17, is in the self-storage industry. The industry built up extremely fast early this decade, adding about 48 million square feet of space and crimping storage rental rates. However, that tightening is now over, as new building starts for storage buildings fell over 50% in 2003.

I am a fan of the storage industry and have on and off owned Shurgard Storage (SHU - commentary - Cramer's Take), not only for the great and steady yield (currently about 5.46%) but also for the fact that it is largely economy independent. When the economy is moving down, people are downsizing and storing the leftovers. When the economy is moving up, people are moving around for new jobs and new opportunities and often need to store stuff while they get themselves set up in new cities. The public players are Public Storage (PSA - commentary - Cramer's Take), Shurgard and Sovran Self Storage (SSS - commentary - Cramer's Take), and now U-Store-It, which was the No. 1 private self-storage owner before going public.

Bearing Down

Build-A-Bear is taking advantage of the trend that has hit the large megacap Toy stores like Toys R Us (TOY - commentary - Cramer's Take). Its stores enable customers to make their own stuffed animals and then buy them, so kids can personalize and customize their toys. With Toys R Us now thinking of abandoning its flagship stores and just becoming a real estate company, companies like Build-A-Bear are expanding, and their incomes are expanding along with them.

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James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and the upcoming Trade Like Warren Buffett. At the time of publication, neither Altucher nor his fund had a position in any of the securities mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback and invites you to send it to [e-mail].

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