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IPO Watch: Best New Stocks of Q3

Whenever there is a spike in volatility, the market for new stocks always gets hit particularly hard. This time around has been no different. For the most part, the initial public offering market has gotten off to a very slow start.

IPO Watch: Best New Stocks of Q3But this does not mean that things are hopeless.

Keep in mind that conditions can change quickly — and the result can spike interest in new stocks. What’s more, for the third quarter, there are a variety of large, high-quality companies prepping IPOs.

OK then, what are the best new stocks to keep an eye on? Well, here are four.

Best New Stocks #1: Albertsons Companies IPO

Best New Stocks #1: Albertsons Companies IPOIn times of instability, there are certain things everyone needs to do, right? Absolutely. And one of them is shopping for groceries. Consider that — for the year so far — Kroger (KR) stock is up about 12%.

And investors who want to double down on grocery stocks may find another attractive option in the IPO of Albertsons, which is the No. 2 grocer in the U.S. There are roughly 2,205 stores across 33 states. Besides the Albertsons brand, the new IPO provides a way to access grocers such as Safeway, Vons, Randalls, Star Market and Carrs.

To boost margins, Albertsons has invested much more on healthy items. In fact, the company has private-label offerings like O Organics, Open Nature, Eating Right and Lucerne.

But going forward, Albertsons may get the most lift from its recent $9.4 billion acquisition of Safeway. With the deal, there are expected to be $440 million in annualized cost synergies in 2015 and $800 million by 2018.

As for the Albertsons IPO, the terms have not been set yet. But the company has selected Goldman Sachs (GS), BofA Merrill Lynch (BAC), Citi (C) and Morgan Stanley (MS) as the lead underwriters.

Best New Stocks #2: Pure Storage IPO

Best New Stocks #2: Pure Storage IPOFor the third quarter, the number of new stocks from the tech sector are fairly sparse. But there is one that should be a standout — Pure Storage.

For the most part, the company has built an innovative solution for storage, which relies on all-flash systems. Interestingly enough, Pure believes that its technology can deliver 10 times the acceleration in business applications versus disk-based storage.

No doubt, growth has been supercharged at Pure: From fiscal 2013 to 2015, revenues have soared from a mere $6.1 million to $174.5 million. But of course, the losses remain heavy. In fiscal 2015, they came to a hefty $183.2 million.

Regarding the IPO, Pure expects to offer 25 million shares at a range of $16 to $18 and plans to list on the NYSE under the symbol of PSTG. The lead underwriters include Morgan Stanley, Goldman Sachs, Barclays (BCS), Allen & Company and BofA Merrill Lynch.

Pure is one of Silicon Valley’s so-called “unicorns” (that is, a company that has a private-market valuation in excess of $1 billion). In other words, the PSTG IPO will certainly be a test on whether VCs have gotten too aggressive with their financing.

Best New Stocks #3: McGraw-Hill Education IPO

Best New Stocks #3: McGraw-Hill Education IPOMcGraw-Hill Education is a top player in educational book publishing. The company sells its offerings to roughly 13,000 pre-kindergarten through 12th grade school districts, as well as a variety of academic institutions.

Granted, this may seem kind of boring and out-of-date … so why consider the McGraw-Hill IPO as part of the best new stocks for Q3? Actually, the company is going through a major transformation as it moves more aggressively to bolster its digital business.

To this end, McGraw-Hill has been investing heavily in new products, such as LearnSmart (which is a well-regarded adaptive learning system), Connect (a mobile-first learning environment for higher education), SmartBooks (which offers interactive digital textbooks), Connect Insight (analytics for educators and students) and Engrade Pro (an open platform for educational tools and curriculum management). The technologies have been shown to improve learning outcomes and pass rates.

And the growth opportunity is enormous. According to Technavio, the e-learning market — for higher education, K-12 and professional training — is forecasted to grow from $74 billion in 2015 to $131 billion by 2019.

Last year, McGraw-Hill posted a 17% increase in revenues to $1.86 billion. Although, there was a net loss of $330.7.

As for the McGraw-Hill Education IPO, the company has yet to name the underwriters or the terms for the deal. The company is currently owned by private equity firm Apollo Global Management (APO), which struck a $2.5 billion buyout back in late 2012.

Best New Stocks #4: Neiman Marcus Group IPO

Best New Stocks #4: Neiman Marcus Group IPOWhen it comes to luxury retailing, Neiman Marcus is one of the most prestigious brands, with roots going back more than 100 years. A key to its success has been a focus on concierge-style service to its customers.

But over the past few years, Neiman Marcus has undergone a transformation. Yes, the company has been investing large sums in technology so as to provide an omni-channel luxury experience. In fact, about 24% of sales were transacted online during fiscal 2014, and about 75% were digitally influenced.

No doubt, there has been a strong focus on social media as well, with platforms like Facebook (FB), Twitter (TWTR), Instagram and Pinterest.

From fiscal 2010 to 2014, Neiman Marcus increased revenues from $3.7 billion to $4.8 billion, and adjusted EBITDA has gone from $474 million to $698 million. Moreover, there has been comparable revenue growth for 22 consecutive quarters.

In all, there are 41 Neiman Marcus locations, including two for Bergdorf Goodman and one for MyThereas location (based in Munich, Germany).

Regarding the IPO, the company has yet to name the underwriters or set the terms of the offering, but the proposed ticker is NMG.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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