2013 was an excellent year for the U.S. IPO market--delivering
its best performance in more than a decade. This trend will
likely continue this year given a surging stock market, improving
economic fundamentals and increasing consumer confidence.
As per IPO research intelligence
, 2013 was the banner year for the IPO market, as 222 companies
completed their IPOs, raising nearly $55 billion. Total number of
IPOs in 2012 and 2011 was 128 and 125, respectively. Most of the
companies that went public last year have outperformed the broad
markets and many generated triple-digit returns.
The two most successful IPOs last year were from healthcare
sector. Insys Therapeutics (
), specialty pharmaceutical company, and GW Pharmaceuticals (
) surged about 384% and 366.7%, respectively, since their debut
on May 2 (read:
3 Hot Sector ETFs for 2014
In terms of proceeds raised, energy companies topped the list
with 22 deals worth $10.7 billion, closely followed by financial
companies with 45 deals worth $10.2 billion. The healthcare
sector trailed technology at the third position with 54 deals
valuing $8.6 billion, largely driven by the biotech space.
What Lies Ahead?
Similar to last year, 2014 will also likely be favorable for the
IPO market. This is because China's ecommerce giant Alibaba Group
is expected to go public with the biggest technology IPO ever,
exceeding Facebook (
). The third-largest U.S. automaker, Chrysler, would also go
public sometime in the first quarter of this year.
Further, investors also seem interested in the IPOs of a bunch of
other well-known companies like Silicon Valley, online coupon
sites -coupons.com and Ebates - site mobile payments provider -
Square - file storage companies - DropBox and Box - as well as
photo-sharing website Pinterest (read:
Track Initial Public Offerings with this New IPO
While investing in many IPOs at the same time could be difficult,
investors could easily tap the IPO resurgence with the two ETFs
First Trust US IPO Index Fund (
This ETF provides exposure to the booming U.S. IPO market by
tracking the IPOX-100 U.S. Index. The fund has accumulated $363.9
million in AUM and sees volume of just under 100,000 shares per
day. It charges 60 bps in fees a year.
In total, the fund holds 100 securities in its basket with the
largest allocation going to Facebook, AbbVie (
) and General Motors (
) that collectively make up for 26.18% share. Other securities do
not hold more than 5.17% share. Since the ETF focuses on 100
largest and most liquid U.S. IPOs, new companies can find entry
into the fund's holding after trading for a minimum of 100 days.
The product has a nice mix of sectors, with the top four being
consumer discretionary, information technology, energy and
healthcare. FPX gained nearly 42% in 2013 and added 0.07%
3 Niche ETFs Crushing the Market
Renaissance IPO ETF (
This is a newly added product in the space that has attracted
$25.2 million in its asset base since its debut nearly three
months ago. The ETF sees moderate volume of nearly 58,000 shares,
ensuring additional cost beyond the expense ratio of 0.60%.
Holding 60 stocks in the basket, the fund follows the Renaissance
IPO Index, which holds the largest and most liquid newly listed
U.S. initial public offerings. New companies seek inclusion on a
'fast entry basis' on the fifth day of trading. Currently, the
product allocates more to FB at 10.38%, closely followed by
Zoetis (9.52%) and Realogy Holdings (5.49%).
From a sector look, technology stocks make up for one-third share
while consumer cyclical, healthcare, real estate and energy
account for double-digit exposure. The fund has added nearly 6%
since inception (read:
4 Best New ETFs of 2013
Considering the most anticipated offerings this year, investors
seeking to take advantage of the new growth stocks could
definitely bank on these two ETFs. The huge success of the new
listings and a prosperous IPO industry would further drive the
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FT-IPOX 100 (FPX): ETF Research Reports
RENAIS-IPO ETF (IPO): ETF Research Reports
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