“There’s cautious optimism that the IPO market has turned the corner,” writes Raymond Hennessey in today’s Wall Street Journal.

“After slogging through a lackluster year for initial public offerings, Wall Street underwriters were able last week to bring three IPOs to market, the most since the week of July 30, according to Dealogic CommScan in New York. These included a deal of some size, the $1.85 billion IPO of insurer Principal Financial Group Inc., the largest deal since consultancy Accenture Ltd.’s $1.67 billion offering on July 19.”

“Not only did they all price, each of the trio of deals managed a solid first-day gain.”

“Principal, a Des Moines, Iowa insurance company that came public through Goldman Sachs Group Inc., rose 13.5% in New York Stock Exchange trading Tuesday. On Thursday, Cross Country Inc., a health care staffing company based in Boca Raton, gained 16.5% after raising $132.6 million through Merrill Lynch & Co. and Citigroup Inc.’s Salomon Smith Barney.”

“That same day, Penn Virginia Resource Partners L.P., a limited partnership set up by Penn Virginia Corp. to lease coal properties, closed up 8% in its own debut, through Lehman Brothers Holdings Inc. and UBS AG’s UBS Warburg.”

“In short, underwriters believe the IPO market passed an important test.”

“‘There is a lot of liquidity in the system,’ said Tom Schnettler, head of investment banking at U.S. Bancorp Piper Jaffray in Minneapolis. ‘There are buyers out there, and if we can find them companies with strong financials, good management and at a valuation that makes sense, they’ll buy.’”

“For Cross Country and Penn Virginia, not only did they gain, but they also were aggressive in pricing their deals, something uncommon in what has been a soft IPO market. Cross Country’s $17 offering price was at the upper end of expectations of $15 to $17 a share. Penn Virginia priced its limited-partnership interests at $21 each, nearly at the top of estimates of $19.50 to $21.50 a share.”

“Of course, none of these companies was considered to be that much of a risky bet coming into the week. Principal is a global financial-services company, and Cross Country and Penn Virginia are both in extremely defensive sectors. All three companies are profitable.”

“These kinds of financial profiles should continue to be the rule for IPOs, at least for the foreseeable future. ‘I don’t think the market’s ready to start pushing that profile,’ Schnettler said. ‘If we do, I think we’ll see more resistance.’”

“But underwriters will take what they can get. In an uneven year of fits and starts for IPOs, three wins in one week has been a rare accomplishment.”

“What’s more, the successes appear to be sustainable. Principal, for one, which sold 100 million shares, couldn’t have come to market without a fairly large investor base. And yet, there was enough demand to sell the deal, then see buying when trading began.”

“‘There has been a lot of money sitting on the sidelines,’ said David Menlow, president of IPOfinancial.com, a new-issues research firm in Millburn, N.J. ‘There are people willing to selectively bite.’”