Leader Board Shakeup


Companies that recently went public saw shares jump last week as 16 out of the 20 stocks we've been following since July all rose. One company is now up 60 percent since mid-July and I've noticed that one sector is a clear outperformer.

Our top performing stocks from last week continue to hold their 'top-5' designation, although there has been a changing of the guard in the top slot. Last week QLIK Technologies (Nasdaq: QLIK) took over the best performer position, unseating MakeMyTrip Limited (Nasdaq: MMYT) as the online travel company saw its shares fall 5.5 percent. In sharp contrast QLIK leapt ahead by 5.3 percent and is now up 60.1 percent since its first traded price on July 16 th .

***According to Ipreo, a data and technology supplier, technology companies have outperformed every other sector this year. Tech IPOs have posted an average gain of 7.2 percent on their first day of trading - compared to the 6 percent average gain from all IPOs in the US.

With the tech sector outperforming thus far in 2010, I'm not surprised to see QLIK Technologies return 60 percent over the last two months. Tech comprised about half of all the newly public companies that posted double-digit gains on their first day of trading.

I don't expect that trend to end anytime soon. Mary Ann Deignan, head of Equity Capital Markets for the Americas at UBS AG ( UBS ) agrees. She says,

"Market pundits believe tech will be one of the sectors that will lead the market recovery because there's so much pent-up demand for spending both on the personal and business side, and when the economic spigot opens, tech companies will be the immediate beneficiaries".

Even though MakeMyTrip Limited dropped from the number one spot this past week, the company has still returned 49.5 percent since going public.

*** Strong performer Molycorp Inc. ( MCP ) , a producer of rare earth oxides, has moved up the charts and is now the third best returning IPO stock since July.

Molycorp was the top performer last week - its stock jumped 23.3 percent as its "quiet period" came to a close. During this quiet period, usually 40 calendar days after a company goes public, the underwriters and insiders are prohibited from issuing research reports or earnings forecasts for the company.

Now that the quiet period has ended, I wouldn't be surprised if analyst coverage picks up. I'll be looking for updated earnings forecasts and revenue estimates, as well as an industry outlook to help support this stock's momentum. The rare earth oxide industry supplies materials for alternative energy producers, and with interest in this segment picking up a domestic supplier such as Molycorp garners quite a bit of investor attention.

Other winners from last week include NXP Semiconductors (Nasdaq: NXPI) and Tesla Motors (Nasdaq: TSLA) . Losers included China Kanghui Holdings ( KH ) and Smart Technologies (Nasdaq: SMT), as well as the aforementioned MakeMyTrip Limited.

Smart Technologies Inc. (Nasdaq: SMT) , which sells a popular interactive whiteboard, dropped 5.7 percent last week - the third consecutive down week. The stock is now down 35 percent since its initial price offering.

But I wouldn't give up on this company just because its stock has fallen since going public. For the three months ended June 30, 2010, revenues increased 38 percent. However, the company has suffered (as have many) as fluctuations in foreign exchange rates put a large dent in its net income. With a gross margin of 50.5 percent, I can see this stock bouncing back as currency fluctuations moderate.

*** SouFun Holdings Limited is the only company scheduled to go public in the next three weeks. The company operates a real estate website in China and plans to list on the NYSE under ticker symbol SFUN .

SouFun Holdings expects to offer 2.9 million American Depository Shares (ADSs) between $40.50 and $42.50 a share. American banks issue ADSs, which are US-denominated, to allow investors to purchase shares of foreign companies. At the mid-point of this range, the company will raise just over $120 million dollars and will have a market value of $893 million.

For the six months ended June 30, 2010, the company's revenue increased 85 percent compared to the same time period in the previous year.

Telstra International, which has a 55 percent stake in SouFun, plans to cash out in the IPO by selling 1.8 million ADSs to buyers. Other shareholders are cashing out as well and plan to sell an additional .86 million shares in the offering. I'm not going to say this stock is certain to drop, but I'm always suspicious when owners start cashing out.

As always, I encourage you to do your own homework on any IPO you're considering. There are a ton of them out there and not every single one is a good investment.

To help you learn more about the exciting arena of IPO investing, I recently put together a free special report: Do's and Don'ts of IPO Investing . Click here for the PDF of this free special report.

If you've been active in IPO investing, let me know. My address is: editorial@smallcapinvestor.com .

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.

This article appears in: Investing , Stocks

Referenced Stocks: KH , MCP , UBS

Wyatt Investment Research

Wyatt Investment Research

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