Quick spurts of 50%, 75% or more aren’t uncommon.
HiSoft Technologies (Nasdaq: HSFT) has surged 200% since it happened to their stock. JinkoSolar (NYSE: JKS) is already up more than 155%… in a matter of less than nine months.
The best news?
There are plenty of companies out there that could have the same thing happen to them in 2011. Names like Skype, Zillow, Twitter, Toys ‘R’ Us and Facebook could all see the same sort of reaction if they decide to take part.[ad#Google Adsense]Of course, I’m talking about the gains following an initial public offering (IPO).
I think 2011 is going to be a bumper crop in IPOs. That will mean hundreds of potential new opportunities for investors. And if they are even half as successful as the new stocks like HiSoft and JinkoSolar that we’ve welcomed in recent months, hang on.
Needless to say, companies would much rather go public when investors are in an optimistic buying mood. And as the economic crisis has abated, many companies are finding the public to be much more receptive these days. So more and more are testing the IPO waters.
According to research firm Hoovers, the number of initial public offerings doubled from 30 in 2008 to 60 in 2009. And research outlet IIR Group says we finished 2010 with a 120% increase in IPO activity.
And that’s just in the United States. In China alone there were 172 IPOs during the first half of 2010 that raked in $31 billion in proceeds. Globally, the number of new offerings is on track to surge 154%.
One caveat: Just because a company goes public doesn’t mean its shares are a sure bet.
Over-hyped IPOs that skyrocket into overvalued territory right out of the gate usually don’t have a happy ending for the investors that were late to the party.
So what’s the solution if you don’t want to get burned by an overheated IPO? I’ve found a fund that could be just the thing.
First Trust US IPO (NYSE: FPX) is an exchange-traded fund (ETF) that invests at least 90% of its assets in common stocks that make up the IPOX-100 U.S. Index. The index includes the 100 largest, best-performing U.S. IPOs in the IPOX Global Composite Index.[ad#ChinaBlankCheck]The index includes IPOs on their seventh trading day after going public and automatically rolls them off the list after 1,000 trading days. The index hosts a broad mix of global IPOs, including large, more mature companies like Visa (NYSE: V), all the way to much talked-about growth companies like Tesla (Nasdaq: TSLA). [Note: The fund is a bit top heavy — the three largest holdings make up 28% of the assets. That means even though the fund holds 100 companies, returns will be most impacted by the performance of a handful of holdings.]
Action to Take–> FPX was up 18% last year. With IPOs in the U.S. slowly getting back to pre-recession numbers, I expect the fund to see more interest (and another great year) in 2011.
— Nathan Slaughter[ad#jack p.s.]