How to Get in on 100 IPOs... With One Little-Known Security

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Quick spurts of 50%, 75% or more aren't uncommon.

HiSoft Technologies (Nasdaq: HSFT) has surged 200% since it happened to their stock. JinkoSolar ( 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.

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 theIPO 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 inIPO 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 itsshares are a sure bet.

Over-hyped IPOs that skyrocket intoovervalued 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 overheatedIPO ? I've found a fund that could be just the thing.

First Trust USIPO ( 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 . Theindex includes the 100 largest, best-performing U.S.IPOs in the IPOX Global CompositeIndex .

Theindex includesIPOs on their seventh trading day aftergoing public and automatically rolls them off the list after 1,000 trading days. Theindex hosts a broad mix of globalIPOs , including large, more mature companies like Visa ( 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. WithIPOs 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

P.S. -- Time is running out to receive my Top 10 Stocks for 2011 report. Last year's list tripled the S&P, and one of this year's ideas is already up 51% since the report went public. For more details, be sure to read this memo.

Disclosure: Neither Nathan Slaughter nor StreetAuthority, LLC hold positions in any securities mentioned in this article.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

© Copyright 2001-2010 StreetAuthority, LLC. All Rights Reserved.


This article appears in: Investing , Basics , Investing Ideas

Referenced Stocks: ETF , FPX , JKS , TSLA , V

Nathan Slaughter

Nathan Slaughter

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