Can Value Investors Buy IPOs?

  • (0:30) - IPO’s For Value Investors
  • (2:50) - IPO Criteria: When Is The Right Time To Buy?
  • (5:15) - Tracey’s Top Picks
  • (18:50) - Episode Roundup: EAF, GTES, HUD, COLD, GSKY


Welcome to Episode #137 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

IPOs are the big story in 2019.

Yet many seem to have an issue with valuation because a lot of them aren’t profitable. There is no “E” in the P/E.

Does that mean value investors are shut out of the IPO market?

How Value Investors Can Buy IPOs

Value investors are known for their patience. They will wait until the price is right to buy.

Instead of buying the hottest new launches, why not look back at IPOs from the last two years?

Tracey looked through lists of the top IPOs of 2017 and 2018 to see if there were any values either by P/E or other value metrics like P/S or P/B ratios.

While growth still dominated, there were some surprising stocks that made the cut.

5 Attractively Valued Recent IPOs

1.       Graftech EAF was the cheapest of the bunch and is a true value stock. It trades with a forward P/E of just 4.9. It’s in the steel industry as its tag line is “engineering the future” for its steelmaking customers.  Year-to-date, the stock has rebounded 23%.

2.       Gates Industrial Corp. GTES is in fluid power and power transmission solutions. It’s trading under its 2018 IPO price but has rebounded 22.5% on the year. It has a forward P/E of just 12.6 and a P/B ratio of only 2.0. These are some bona fide value credentials.

3.       Hudson Limited HUD operates the Hudson News stores in airports and train stations as well as duty free shops. It has a P/B ratio of 2.2 and a P/S ratio of only 0.7. However, estimates have been cut in the last 60 days and the stock is now a Zacks Rank #4 (Sell).

4.       Americold Realty Trust COLD operates temperature-controlled warehouses worldwide. Shares have soared in 2019, up 69%. It’s not as cheap as it was to start the year, with a forward P/E of 23.6, but investors will get a dividend yielding 2.6%.

5.       GreenSky GSKY is a fin-tech company with point-of-sale technology for merchants in the home improvement and healthcare industries. It grew active merchants by 37% in fiscal 2018 to 14,907. It expects revenue growth between 30% and 38% in 2019 and yet it trades with an attractive P/E of just 21.

While not all of these stocks would be considered to be “dirt cheap” they are profitable and have attractive valuations.

What else should value investors know about buying IPO stocks?

Tune into this week’s episode to find out.

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Hudson Ltd. (HUD): Free Stock Analysis Report
Gates Industrial Corporation PLC (GTES): Free Stock Analysis Report
GrafTech International Ltd. (EAF): Free Stock Analysis Report
Americold Realty Trust (COLD): Free Stock Analysis Report
GreenSky, Inc. (GSKY): Free Stock Analysis Report
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Zacks Investment Research

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


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