Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

LinkedIn Corp (LNKD), Pandora Media Inc (P): The Ducks Are Quacking

Although we don’t believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes — just in case they’re material to our investing thesis.

The news of Larry Summers’ withdrawal from consideration as Fed chairman was probably instrumental in driving stocks higher today. The S&P 500 picked up 0.6% to close just seven-tenths of a percentage point below its August 2 all-time (nominal) high. The narrower, price-weighted Dow Jones Industrial Average rose 0.8% and is now within 1% of its all-time high (also set on August 2).

Despite these gains, the CBOE Volatility Index rose 1.6% today, to close at 14.38 — the VIX, Wall Street’s “fear index,” is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days. The increase may reflect investors’ uncertainty concerning the outcome of the Fed’s two-day policy meeting, which begins tomorrow. The market expects the Fed to announce that it will begin scaling back its monthly bond purchases, but the details of the “taper” — even assuming that is the outcome of the meeting — are fodder for some guessing games.

Either way, I’m not surprised to see the VIX rise today, as 14 really looks like a floor for the VIX in the current environment. There are more than enough risk factors that could provoke a bout of volatility over the next 30 days: Take your pick among Syria, the German elections, or pitched battles over the U.S. budget/ debt ceiling, to name just three of the most prominent.

Linkedin Corporation

The ducks are quacking for hot technology issues!

Less than two weeks ago, professional social networking platform LinkedIn Corp (NYSE:LNKD) announced a billion-dollar-plus secondary share offering. Last week, Twitter announced it had filed for an initial public offering.

Sensing the moment is opportune, Pandora Media Inc (NYSE:P) filed today for a secondary stock offering of its own. The Internet radio service will sell up to 12.1 million shares, which would raise the share count by approximately 7%, and expects to raise up to $279.4 million.

At 143 times the estimate of the next 12 months’ earnings per share, per S&P Capital IQ, LinkedIn Corp (NYSE:LNKD)’s shares look awfully expensive, but the business is solidly profitable, its earnings are protected by a competitive moat, and its growth prospects are good (maybe even excellent).

At 154 times, Pandora Media Inc (NYSE:P) is even more expensive, but it hasn’t had a profitable year, on a GAAP basis, in at least six years. Sure, the Wall Street consensus has the company achieving profitability in fiscal 2015, but the truth is that, for a business like this, analysts have little to no confidence regarding the magnitude or even the direction of their estimates.

Don’t take my word for it, though. Take a look at the 28 pages of risk factors the company lists in its filing, the first two of which are:

Internet radio is an emerging market, which makes it difficult to evaluate our current business and future prospects.

We have incurred significant operating losses in the past and may not be able to generate sufficient revenue to be profitable.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.