MONEY Food & Drink

Why Shake Shack’s IPO Is Too Rich for My Blood

Shake Shack founder Danny Meyer (3rd R) and Shake Shack CEO Randy Garutti (2nd R) ring the opening bell at the New York Stock Exchange to celebrate their company's IPO January 30, 2015. Shares of gourmet hamburger chain Shake Shack Inc soared 150 percent in their first few minutes of trading on Friday, valuing the company that grew out of a hotdog cart in New York's Madison Square Park at nearly $2 billion.
Shake Shack founder Danny Meyer CEO Randy Garutti ring the opening bell at the New York Stock Exchange. Brendan McDermid—Reuters

I used to think Shake Shack might be undervalued. Not anymore.

Last week, I wrote a positive article on burger chain Shake Shack’s SHAKE SHACK INC SHAK 118.5714% IPO on the basis that, “in [the indicative $14 to $16] price range, the shares could significantly undervalue Shake Shack’s growth potential.” The shares began trading today, and I’m much less excited about the offering. In fact, I think investors ought to avoid the stock entirely. What’s changed?

Is no price too high?

It’s not unreasonable to think a stock that is attractive at $15 may well be repulsive at more than three times that price — which is where Shake Shack shares are now trading. (The stock was at $48.62 at 12:30 p.m. EST.) Indeed, the underwriters raised the price range to $17 to $19 — and the number of shares being sold — before finally pricing the shares at $21.

Apparently, that did nothing to deter investors once shares began trading in the second market this morning – they opened at $47, for a 124% pop! Despite solid or even outstanding fundamentals, a business will not support any valuation. Price matters.

Last week, I compared Shake Shack to Chipotle Mexican Grill CHIPOTLE MEXICAN GRILL INC. CMG -0.6564% . Let’s see how the share valuations of the two companies on their first day of trading now compare:

Number of restaurants operated by the company at the time of the public offering Price / TTM Sales
(based on closing price on first day of trading)*
Chipotle 453 4.4
Shake Shack 26 16.1

*Shake Shack’s price-to-sales multiple is based on the $48.62 price at 12:30 p.m. EST. Source: Company documents.

That’s a huge gap between the two price-to-sales multiples! Given the massive appreciation in Chipotle’s stock price since the close of its first day of trading — a more than fifteenfold increase in just more than nine years! — there’s a good argument to be made that the shares were undervalued at that time.

However, had Chipotle closed at $160 instead of $44 on its first day of trading — which would equalize the price-to-sales multiples — subsequent gains would have been significantly less impressive.

Buy potential performance at a discount, not a premium

Furthermore, with Chipotle, we are looking back at performance that has already been achieved, both in terms of the stock and the company’s operations. The Mexican chain has executed superbly well during that period.

With regard to Shake Shack — however likely you think a similar business performance is — it remains in the realm of possibility instead of certainty. I don’t know about you, but when I buy possibility, I like to buy it at a discount to the price of certainty.

Although I think Shake Shack’s brand positioning is comparable, and possibly even superior, to that of Chipotle, I’m not convinced the business fundamentals are as attractive.

For one thing, Shake Shack faces stiffer competition in its segment than Chipotle did (or does) in the likes of Five Guys and In-N-Out Burger. For another, Shake Shack’s same-store sales growth is significantly lower than Chipotle’s was, at just 3% for the 39 weeks ended Sep. 24 versus 10.2% for Chipotle in 2005, which was followed by 13.7% in 2006.

Don’t swallow these shares

Shake Shack may produce a premium burger — founder Danny Meyer refers to this segment as “fine casual dining” — but the stock is currently selling at a super-premium price. Paying that price is the equivalent of eating “empty calories” — it could end up being detrimental to your financial health.

Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

 

Related Links

MONEY Oil

Why Oil Prices May Not Recover Anytime Soon

A worker waits to connect a drill bit on Endeavor Energy Resources LP's Big Dog Drilling Rig 22 in the Permian basin outside of Midland, Texas, U.S., on Friday, Dec. 12, 2014.
Brittany Sowacke—Bloomberg via Getty Images

Things could get worse for the oil industry before they get better.

Oil prices have collapsed in stunning fashion in the past few months. The spot price of Brent crude reached $115 a barrel in June, and was above $100 a barrel as recently as September. Since then, it has plummeted to less than $50 a barrel.

Brent Crude Oil Spot Price Chart

There is a sharp split among energy experts about the future direction of oil prices. Saudi Prince Alwaleed bin Talal recently stated that oil prices could keep falling for quite a while and opined that $100 a barrel oil will never come back. Earlier this month, investment bank Goldman Sachs weighed in by slashing its short-term oil price target from $80 a barrel all the way to $42 a barrel.

But there are still plenty of optimists like billionaire T. Boone Pickens, who has vocally argued that oil will bounce back to $100 a barrel within 12 months-18 months. Pickens thinks that Saudi Arabia will eventually give in and cut production. However, this may be wishful thinking. Supply and demand fundamentals point to more lean times ahead for oil producers.

Oil supply is comfortably ahead of demand

The International Energy Agency assesses the state of the global oil market each month. Lately, it has been sounding the alarm about the continuing supply demand imbalance.

The IEA currently projects that supply will outstrip demand by more than 1 million barrels per day, or bpd, this quarter, and by nearly 1.5 million bpd in Q2 before falling in line with demand in the second half of the year, when oil demand is seasonally stronger.

That said, these projections are built on the assumption that OPEC production will total 30 million bpd: its official quota. However, OPEC production was 480,000 bpd above the quota in December. At that rate, the supply-and-demand gap could reach nearly 2 million bpd in Q2.

Theoretically, this gap between supply and demand could be closed either through reduced supply or increased demand. However, at the moment economic growth is slowing across much of the world. For oil demand to grow significantly, global GDP growth will have to speed up.

It would take several years for the process of lower energy prices helping economic growth and thereby stimulating higher oil demand to play out. Thus, supply cuts will be necessary if oil prices are to rebound in the next two years-three years.

Will OPEC cut production?

There are two potential ways that global oil production can be reduced. One possibility is that OPEC will cut production to prop up oil prices. The other possibility is that supply will fall into line with demand through market forces, with lower oil prices driving reductions in drilling activity in high-cost areas, leading to lower production.

OPEC is a wild card. A few individuals effectively control OPEC’s production activity, particularly because Saudi Arabia has historically borne the brunt of OPEC production cuts. Right now, the powers that be favor letting market forces work.

There’s always a chance that they will reconsider in the future. However, the strategic argument for Saudi Arabia maintaining its production level is fairly compelling. In fact, Saudi Arabia has already tried the opposite approach.

In the 1980s, as a surge in oil prices drove a similar uptick in non-OPEC drilling and a decline in oil consumption, Saudi Arabia tried to prop up oil prices. The results were disastrous. Saudi Arabia cut its production from more than 10 million bpd in 1980 to less than 2.5 million bpd by 1985 and still couldn’t keep prices up.

Other countries in OPEC could try to chip in with their own production cuts to take the burden off Saudi Arabia. However, the other members of OPEC have historically been unreliable when it comes to following production quotas. It’s unlikely that they would be more successful today.

The problem is that these countries face a “prisoner’s dilemma” situation. Collectively, it might be in their interest to cut production. But each individual country is better off cheating on the agreement in order to sell more oil at the prevailing price, no matter what the other countries do. With no good enforcement mechanisms, these agreements regularly break down.

Market forces: moving slowly

The other way that supply can be brought back into balance with demand is through market forces. Indeed, at least some shale oil production has a breakeven price of $70 a barrel-$80 a barrel or more.

This might make it seem that balance will be reasserted within a short time. However, there’s an important difference between accounting profit and cash earnings. Oil projects take time to execute, involving a significant amount of up-front capital spending. Only a portion of the total cost of a project is incurred at the time that a well is producing oil.

Capital spending that has already been incurred is a “sunk cost.” The cost of producing crude at a particular well might be $60 a barrel, but if the company spent half that money upfront, it might as well spend the other $30 a barrel to recover the oil if it can sell it for $45 a barrel-$50 a barrel.

Thus, investment in new projects drops off quickly when oil prices fall, but there is a significant lag before production starts to fall. Indeed, many drillers are desperate for cash flow and want to squeeze every ounce of oil out of their existing fields. Rail operator CSX recently confirmed that it expects crude-by-rail shipments from North Dakota to remain steady or even rise in 2015.

Indeed, during the week ending Jan. 9, U.S. oil production hit a new multi-decade high of 9.19 million bpd. By contrast, last June — when the price of crude was more than twice as high — U.S. oil production was less than 8.5 million bpd.

One final collapse?

In the long run — barring an unexpected intervention by OPEC — oil prices will stabilize around the marginal long-run cost of production (including the cost of capital spending). This level is almost certainly higher than the current price, but well below the $100 a barrel level that’s been common since 2011.

However, things could get worse for the oil industry before they get better. U.S. inventories of oil and refined products have been rising by about 10 million barrels a week recently. The global supply demand balance isn’t expected to improve until Q3, and it could worsen again in the first half of 2016 due to the typical seasonal drop in demand.

As a result, global oil storage capacity could become tight. Last month, the IEA found that U.S. petroleum storage capacity was only 60% full, but commercial crude oil inventory was at 75% of storage capacity.

This percentage could rise quickly when refiners begin to cut output in Q2 for the seasonal switch to summer gasoline blends. Traders have even begun booking supertankers as floating oil storage facilities, aiming to buy crude on the cheap today and sell it at a higher price this summer or next year.

If oil storage capacity becomes scarce later this year, oil prices will have to fall even further so that some existing oil fields become cash flow negative. That’s the only way to ensure an immediate drop in production (as opposed to a reduction in investment, which gradually impacts production).

Any such drop in oil prices will be a short-term phenomenon. At today’s prices, oil investment will not be sufficient to keep output up in 2016. Thus, T. Boone Pickens is probably right that oil prices will recover in the next 12 months-18 months, even if his prediction of $100 oil is too aggressive. But with oil storage capacity becoming scarcer by the day, it’s still too early to call a bottom for oil.

MONEY stocks

Here Are Ways to Tell If Stocks Are Overvalued

Different metrics can show polar opposite views of market valuation.

The S&P 500 has more than tripled in value since early 2009.

It’s one of the best five-year periods in market history, roughly matching the 1995-2000 bull market that created one of the largest bubbles ever.

What’s that mean for market values today?

Depends who you ask.

James Paulsen, chief investment strategist at Wells Capital Management, noted last week that the median S&P 500 company now trades at the highest price-to-earnings ratio since his records began in 1950.

The only reason the market as a whole doesn’t look as overvalued as the median component is because some of the S&P 500’s largest companies that carry the most weight in the index, like ExxonMobil EXXONMOBIL CORPORATION XOM -0.1827% and Apple APPLE INC. AAPL -1.4634% , are still fairly cheap.

The median company is also near a record high measured on price-to-book value and price-to-cash flow.

These are eye-opening statistics that show how much the rally of the last five years may have borrowed from future returns.

But then again…

There are all kinds of ways to value the market. None is necessarily right or wrong, because what matters — what moves markets — is whatever investors care about at a given moment.

And what do people care about right now? Dividends, for one.

With interest rates at rock-bottom levels, dividends have become wildly popular as one of the last remaining places you can earn a yield above the rate of inflation. They became viewed as bond substitutes for income-starved investors. Boring, low-growth sectors that emphasize dividends, like utilities, trade at a higher valuation than high-growth technology stocks. The clamor for dividends in the last five years has been insatiable.

Two things happened recently to help that trend:

  • Interest rates on Treasury bonds have plunged. Ten-year Treasuries now yield 1.8%, from 2.9% a year ago.
  • Dividend payouts have surged. The S&P 500 is up 72% since 2010, but S&P 500 dividends are up 84%.

Combine the two, and 51% of S&P 500 companies now have a dividend yield above the yield on 10-year Treasury bonds. That’s the highest going back 15 years, above even the levels of early 2009, when the market bottomed:

Source: S&P Capital IQ, Federal Reserve.

 

Relative to bonds, S&P 500 companies may be about as cheap as they’ve ever been.

The S&P 500 as a whole now yields more than Treasury bonds. That doesn’t happen very often, but history says stocks tend to do extraordinary well when it does.

Is this a better measure of market value than Paulsen’s metric? I don’t know. I don’t think anyone does.

But it may be more relevant to the average investor today — right now — who is deciding how to allocate his or her money. You can increasingly find more yield in the stock market than you can the bond market. As long as that’s the case, it’s hard to imagine flocks of investors giving up on stocks and running to the “safety” of bonds.

The big point here is that different metrics, both of which seem reasonable, can show polar opposite views of market valuation. That’s dangerous, because no matter how you feel about stocks you can find data to back yourself up. This is as true for Paulsen’s metric as it is my own.

Depending on what metrics you want to use, today’s market looks somewhere between dirt cheap and bloody expensive. I really don’t think it’s obvious which side is right. My feeling is dividends are one of the biggest forces driving stocks right now, but someday that will change. Maybe people will start caring about Paulsen’s metric — or something else entirely.

“There are no rules about what a stock, bond, currency, commodity, house, car, dog, cat, diamond, bicycle, soap dish, refrigerator, concert ticket, plane ride or glass of wine are worth,” James Osborne, president of Bason Asset Management, wrote recently. “They are worth what people are willing to pay for them, which is what markets are all about. That’s the value.”

Check back every Tuesday and Friday for Morgan Housel’s columns.

TIME Retail

Shoes Are Getting More Expensive

Leather Shoes
Men's shoes in the Dolce & Gabbana seasonal holiday window in New York City on Dec. 11, 2013 Ben Hider—Getty Images

Leather prices rise amid a cattle shortage

The cost of footwear in the U.S. rose 2.8% in the past year, according to new government data, an increase that’s likely due in part to the rising costs of leather.

The data from the Bureau of Labor Statistics comes as the U.S., which is one of the world’s biggest producers of cowhides, currently experiencing a record shortage of the animal. The U.S. Department of Agriculture estimates that the current U.S. cow population — about 95 million — is at its lowest level since the department began keeping track in 1973.

The high cost of cattle feed and the nation’s drought have contributed to the declining cattle population, Quartz reports.

TIME Markets

This is Why Trees Come Down When the Gold Price Goes Up

141339701
Getty Images

A new study establishes a connection between demand for gold and deforestation

The steep rise in the price of gold is a factor in the heightened rate of deforestation in South America, a new study has found.

The study, conducted by researchers from the University of Puerto Rico, says small-scale miners now find it profitable to try and extract the metal from low-grade seams underneath the region’s rain forests.

With the price of gold rising five times between 2001 and 2013, satellite data shows an area of 1,680 sq km cleared across forests in Brazil, Peru and the Guianas. Much of this was in protected areas, the Guardian reports.

During the second half of the period, deforestation doubled in speed as financial crises around the world caused the price of gold to shoot up.

Agriculture and logging are responsible for clearing more forest, but, researchers say, miners are more harmful to the soil and to water sources because of their use of mercury, cyanide and arsenic.

TIME Currency

Bitcoin Continues to Plummet

Newest Innovations In Consumer Technology On Display At 2015 International CES
A general view of the Bitcoin booth at the 2015 International CES at the Las Vegas Convention Center on Jan. 8, 2015 in Las Vegas, Nevada. Ethan Miller — Getty Images

The digital currency is getting off to a poor start in 2015 after a rough ride last year

The price of Bitcoin dropped again this week, sliding to its lowest level since early 2013, suggesting that confidence in the contentious cryptocurrency may be shrinking.

On Tuesday, the price of Bitcoin dropped from $267 to about $224, sinking below its April 2013 value, which was before its popularity skyrocketed, according to the New York Times.

In the past year, the digital currency has been hit with myriad setbacks including market woes, fresh regulations and stagnation of usage even as transactions have increased, which in part resulted in a more than 50% drop in the price of bitcoin.

[NYT]

TIME Markets

Saudi Prince Says We’ll ‘Never’ See $100 Oil Barrels Again

Al Waleed Bin Talal Visits Zaatari Refugee Camp In Jordan
Saudi Prince Alwaleed bin Talal visits Zaatari camp for Syrian refugees northeastern Jordan Jordan Pix—Getty Images

"You better believe it is gonna go down more," Alwaleed bin Talal said

Saudi royal prince Alwaleed bin Talal says in a new interview that the days of $100-a-barrel oil are a thing of the past, as oil prices continue to drop around the globe.

Asked by USA Today if prices, recently below $50 a barrel, would continue to plunge, Talal answered:

If supply stays where it is, and demand remains weak, you better believe it is gonna go down more. But if some supply is taken off the market, and there’s some growth in demand, prices may go up. But I’m sure we’re never going to see $100 anymore. I said a year ago, the price of oil above $100 is artificial. It’s not correct.

He also categorized theories that the U.S. and Saudis are colluding to keep prices low to hurt Russian President Vladimir Putin as “baloney and rubbish.”

Read more at USA Today

Read next: France Mobilizes 10,000 Troops to Protect Sensitive Sites

Listen to the most important stories of the day.

MONEY Markets

Why Investors Are So Bad at Predicting Market Crashes

NYSE New York Stock Exchange
Stephen Chernin—Getty Images

After the market does well, no one expects a crash. After it crashes, everyone expects it to crash.

Stocks have boomed for nearly six years now. Are we due for a crash?

Yeah, probably. It’ll happen some day. Crashes happen.

But anytime I see people touting metrics that supposedly predict when a cash will occur, I shake my head. None of them work.

Yale School of Management publishes a “Crash Confidence Index.” It measures the percentage of individual and professional investors who think we won’t have a market crash in the next six months. The lower the index, the more investors think a crash is coming.

Yesterday came the headline: “More And More Investors Are Convinced A Stock Market Crash Is Coming.”

The Crash Confidence Index plunged in December to its lowest level in two years. “Less than a quarter of institutional investors and less than a third of individual investors believed that stocks wouldn’t crash,” Business Insider wrote.

Before you panic and liquidate your account, the most important line in Business Insider’s article is this: “On the bright side, this indicator may be a contrarian indicator.”

Bingo.

Plot the Crash Confidence Index (in blue) next to what the S&P 500 did during the following 12 months (in red), and you get this:

Investors were increasingly confident that stocks wouldn’t crash in 2007, and then a crash came. Then they were sure a crash would occur in 2009, just as a monster rally began. Same thing to a lesser degree in 2011.

If you plot the Crash Confidence Index next to what stocks did in the previous two months, you kind of see what’s going on here.

After the market does well — like in 2007 — no one expects a crash. After it crashes — like in 2009 — everyone expects it to crash:

This is similar to the consumer confidence index, which consistently peaks just before the economy is about to get ugly and bottoms when things are about to turn. (Although we only know the timing in hindsight.)

Stocks have done poorly during the last few weeks, so it’s not too surprising that expectations of a crash are growing. People like to extrapolate returns into the future.

We’ll have a crash some day. But more money has probably been lost trying to predict and hedge against a looming crash than has been lost by just expecting and enduring one when it comes.

For more on on this stuff:

More from The Motley Fool: Where Are The Customers’ Yachts?

MONEY stocks

Your 3 Best Investing Strategies for 2015

Trophy with money in it
Travis Rathbone—Prop Styling by Megumi Emoto

Racking up big investing victories over the past six years was easy. Now, though, the going looks to be getting tougher. These three strategies will help you stay on the path to your goals.

There’s nothing like an extended bull market to make you feel like a winner — and that’s probably just how you felt coming into the start of this year.

Sure, the recent wild swings in the stock market may have you feeling a bit more cautious. Still, even now, the Standard & Poor’s 500 stock index has returned more than 200% since the March 2009 market bottom, while and bonds have posted a respectable 34% gain.

The question is, will the winning streak continue?

Should it persist through the current bout of volatility, the stock market rally will be entering its seventh year, making it one of the longest ever; at some point a bear will stop the party. Meanwhile, the Federal Reserve is signaling the end to its program of holding down interest rates and thus encouraging risk taking. And there’s zero chance that Congress will add further fiscal stimulus. In short, the post-crisis investing era—when market performance was largely driven by Washington policy and Fed ­intervention—is over. “As the global risks have receded,” says Jeffrey Kleintop, chief global investment strategist at Charles Schwab, “the focus is going back to earnings and other fundamentals.”

The stage is set for a reversion to “normal,” but as you’ll see, it’s a normal that lacks support for high future returns. For you, that means a balancing act. If you don’t want to take on more risk, you’ll have to accept the probability of lower returns. Following these three guidelines will help you maintain the right risk/reward balance and choose the right investments for the “new” normal.

1) Keep U.S. Stocks As Your Core Holding…

Stocks are expensive. The average stock in the S&P 500 is trading at a price of 16 times this year’s estimated earnings, about 30% higher than the long-run average. A more conservative valuation gauge developed by Yale finance professor Robert Shiller that compares prices with longer-term earnings shows that stocks are trading at more than 50% above their average.

“Given current high valuations, the returns for stocks are likely to be lower over the next 10 years,” says Vanguard senior economist Roger Aliaga-Díaz. He expects annual gains to average between 5% and 8%, compared with the historical average of 10%. Shiller’s numbers suggest even lower returns over the next decade.

That doesn’t mean you should give up on U.S. stocks. They remain your best shot at staying ahead of inflation, especially today, when what you can expect from a bond portfolio is, well, not much. “Stock returns may be lower,” says Aliaga-Díaz, “but bond returns will be much less, so the relative advantage of stocks will be the same.” And the U.S. economy, though far from peak performance, is the healthiest big player on the global field.

Your best strategy: Now is a particularly important time to make sure your stock allocation is matched to your time horizon. “The worst outcome for older investors would be a bear market just as you move into retirement,” says William Bernstein, an adviser and author of The Investor’s Manifesto. A traditional asset mix for someone in his fifties is the classic 60% stock/40% bond split, with a shift to 50%/50% by retirement. If your allocation was set for a 35-year-old and you’re 52, update it before the market does.

On the other hand, if you’re in your twenties and thirties, you should be far less worried about today’s prices. Hold 70% to 80% of your portfolio in equities. The power of compounding a dollar invested over 30 to 40 years is hard to overstate. And you’ll ride through many market cycles during your career, which will give you chances to buy stocks when they’re inexpensive.

2) …But Spread Your Money Widely

With many overseas economies barely out of recession or dragged down by geopolitical crises, international equity markets have been trading at low valuations. And some market watchers are expecting a rebound over the next few years. “Central banks in Europe, China, and Japan are making fiscal policy changes that are likely to boost global growth,” says Schwab’s Klein­- top. Oil prices, which have fallen 40% in recent months, may boost some markets as consumers spend less on fuel and step up discretionary buying.

But foreign stocks aren’t uniformly bargains. The slowdown in China’s economic growth threatens the economies of the countries that supply it with natural resources. Japan’s stimulus program to date has had mixed success, and the reason to expect stimulus in Europe is that policymakers are again worried about deflation.

Your best strategy: Spread your money widely. The typical investor should hold 20% to 30% of his stock allocation in foreign equities, including 5% in emerging markets, says Bernstein. Many core overseas stock funds, such as those in your 401(k), invest mainly in developed markets, so you may need to opt for a separate emerging-markets offering—you can find excellent choices on our ­MONEY 50 list of recommended mutual and exchange-traded funds. For an all-in-one fund, you could opt for Vanguard Total International Stock Index VANGUARD TOTAL INTL STOCK INDEX FD VGTSX -1.2682% , which invests 20% of its assets in emerging markets.

3) Hold Bonds for Safety, Not for Income

Fixed-income investors have few options right now. Today’s rock-bottom interest rates are expected to move a bit higher, which may ding bond fund returns. (Bond rates and prices move in opposite directions.) Yet over the long run, intermediate-term rates are likely to remain below their historical average of 5%. If you want higher income, your only alternative is to venture into riskier investments.

Your best strategy: If you don’t want to take risks outside your stock portfolio, then accept that the role of your bond funds is to provide safety, not spending money. “After years of relative calm, you can expect volatility to return to the stock market—and higher-quality bonds offer your best hedge against stock losses,” says Russ Koesterich, chief investment strategist at BlackRock. Stick with mutual funds and ETFs that hold either investment-grade, or the highest-rated junk bonds. Don’t rely solely on government issues. Corporate bonds will give you a little more yield.

You may be tempted to hunker down in a short-term bond fund, which in theory will hold up best if interest rates rise. But this is one corner of the market that hasn’t returned to normal. Short-term bonds are sensitive to moves by the Federal Reserve to push up rates. The Fed has less ability to set long-term rates, and demand for long-term Treasuries is strong, which will keep downward pressure on the rates those bonds pay. So an intermediate-term bond fund that today yields about 2.25% is a reasonable compromise. Sometimes in investing, winning means not losing.

Read next:
How 2% Yields Explain the World—and Why Rates Have Stayed So Low for So Long

 

TIME Markets

IPOs Raise $249 Billion in 2014 Amid Funding Frenzy

Dow Rises Over 400 Points Day After Fed Signals No Rise In Interest Rates
A trader works on the floor of the New York Stock Exchange in New York City during the afternoon of Dec. 18, 2014. Andrew Burton—Getty Images

Last year was a busy one for public offerings, even without Alibaba’s record-breaking listing

A company looking to raise money in 2014 didn’t have to look too far. Last year was the busiest for initial public offerings since 2010.

From Alibaba Group’s $25 billion IPO to much-hyped smaller listings, such as GoPro and Ally Financial, companies listing on the stock markets raised $249 billion worldwide, according to data collected by Thompson Reuters. Even without Alibaba’s record-breaking offering, last year was a standout period for IPOs.

IPOs picked up pace from 2013: about 40% more companies listed on public markets in 2014 compared to the year prior. They also raised more money. Leaving out Alibaba’s offering, which many agree is a once-in-a-generation kind of IPO, companies raised almost 36% more money year-over-year, according to the New York Times.

The booming market has led some analysts to speculate that it is inflated past realistic valuations, pumped up by overly optimistic investors. For instance, Lending Club’s December IPO valued the online lender at 35 times estimated revenue for 2017, which would put it on par with tech companies such as Facebook.

The public markets weren’t the only place to raise big bucks. The private market also saw big number sums, including Uber’s $1.8 billion fundraising round that valued it at $40 billion. Chinese smart phone maker Xiaomi and online home rental service Airbnb also raised huge sums that valued the startups at $10 billion or more.

Fundraising in both the public and private markets have been driven by a confluence of factors, including low interest rates that have pushed investors toward higher-growth opportunities and a skyrocketing stock market.

While no mega-IPO like Alibaba is set for the year ahead, there are some big-name companies that are scheduled to go public, including file-sharing startup Box and “fine casual” dining chain Shake Shack.

Other potential IPOs remain the subject of much speculation. Investors are watching startups such as Uber, Pinterest and Fitbit carefully, though none have yet indicated when or if they will list on public markets.

This article originally appeared on Fortune.com

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser