Through yesterday, October 30, 66 companies have IPO'd in 2015 with market capitalizations in excess of $500 million. Here is the updated list of the top 20 stocks of the Class of 2015, ranked by returns over the IPO price:
1. Spark Thearpeutics (ONCE) up 134.4%
2. Global Blood Therapeutics (GBT) up 133.2%
3. Shake Shack (SHAK) up 117.0%
4. FitBit (FIT) up 102.7%
5. Kearny Financial (KRNY) up 64.9%
6. Seres Therapeutics (MCRB) up 64.7%
7. Edge Therapeutics (EDGE) up 62.6%
8. Aduro Bitoech (ADRO) up 58.9%
9. Black Knight (BKFS) up 47.1%
10. Appfolio (APPF) up 45.9%
11. Chiasma (CHMA) up 42.1%
12. GoDaddy (GDDY) up 37.4%
13. Conformis (CFMS) up 30.5%
14. Rapid7 (RPD) up 28.5%
15. Virtu Financial (VIRT) up 27.4%
16. Multi Packaging (MPSX) up 25.8%
17. Press Ganey (PGND) up 25.4%
18. Penumbra (PEN) up 23.4%
19. Wingstop (WING) up 21.7%
20. Performance Food (PFGC) up 19.8%
The list is still dominated with development-stage medical and biotech companies, as has been the case all year, However, the recent pullback in this sector among the bigger pharma and biotech names may reduce the number of future medical IPOs going forward.
Saturday, October 31, 2015
Wednesday, October 7, 2015
Tuesday, September 22, 2015
IPO Entry Points
The market's newfound volatility and declines are giving investors one thing that should not be overlooked. And that is, the market is forcing many new and promising IPO stocks into corrections and base building patterns.
If you follow Investor's Business Daily (IBD), the seesaw reaction in its market outlook this year was a indicator to an aging bull run. Caution has been rewarded. But even in markets like these, new companies emerge, and one should not lose focus on what looks promising.
Recently, IBD hosted an hour-long webinar on IPO investing. This video can be found on its website. An abbreviated version of it was posted a year ago, and we've posted it here:
Yesterday, we posted a chart from TradingView on a stock that we highlighted on Seeking Alpha last month, Rapid 7. The stock has been in a two-month IPO base, which we interpret to be a double-bottom. The buy point is $25.48. Monday's trade took RPD to the brink of this price on heavy volume. As of this writing, the stock has backed off amid the broad market selloff. We intend to buy this stock at this buy point.
If you follow Investor's Business Daily (IBD), the seesaw reaction in its market outlook this year was a indicator to an aging bull run. Caution has been rewarded. But even in markets like these, new companies emerge, and one should not lose focus on what looks promising.
Recently, IBD hosted an hour-long webinar on IPO investing. This video can be found on its website. An abbreviated version of it was posted a year ago, and we've posted it here:
Yesterday, we posted a chart from TradingView on a stock that we highlighted on Seeking Alpha last month, Rapid 7. The stock has been in a two-month IPO base, which we interpret to be a double-bottom. The buy point is $25.48. Monday's trade took RPD to the brink of this price on heavy volume. As of this writing, the stock has backed off amid the broad market selloff. We intend to buy this stock at this buy point.
Monday, September 21, 2015
Wednesday, September 2, 2015
IPO Class of 2015: A Top 25 Ranking
Today the markets staged a big advance, led by the Nasdaq's 2.46% rally. Nevertheless, we remain in a market correction. The IPO market has quieted down in the aftermath, with nothing expected to price in the next few weeks. In the meantime, we screened the IPO Class of 2015, and ranked them by their performance. Here are the Top 25, as of today's close:
1. Tantech Holdings (TANH) up 623% since March 24 IPO date
2. The Global Blood (GBT) up 160% since August 11 IPO date
3. Seres Therapeutics (MCRB) up 133% since June 25 IPO date
4. Inotek Pharmaceuticals (ITEK) up 132% since Feb 18 IPO
5. Shake Shack (SHAK) up 131% since Jan 29 IPO
6. Zynerba Pharma (ZYNE) up 115% since Aug 4 IPO
7. Spark Therapeutics (ONCE) up 89% since Jan 30 IPO
8. Kempharm Inc (KMPH) up 82% since Apr 15 IPO
9. Pronai Therapeutic (DNAI) up 79% since July 15 IPO
10. Neos Therapeuritc (NEOS) up 77% since July 23 IPO
11. Chiasma Inc (CHMA) up 77% since July 15 IPO
12. Fitbit Inc (FIT) up since June 17 IPO
13. Glaukos Corp (GKOS) up 66% since June 24 IPO
14. Blueprint Medical (BPMC) up 58% since April 29 IPO
15. Kearny Financial (KRNY) up 57% since May 14 IPO
16. Wingstop (WING) up 44% since June 11 IPO
17. Solaredge Technology (SEDG) up 41% since March 26 IPO
18. Aimmune Therapeutic (AIMT) up 39% since Aug 5 IPO
19. Black Knight (BKFS) up 37% since May 19 IPO
20. Press Ganey (PGND) up 33% since May 20 IPO
21. Appfolio (APPF) up 31% since June 25 IPO
22. Summit Materials (SUM) up 30% since March 11 IPO
23. Rapid 7 Inc (RPD) up 30% since July 16 IPO
24. Entellus Medical (ENTL) up 29% since Jan 28 IPO
25. Collegium Pharma (COLL) up 26% since May 6 IPO
Once again we point out the overwhelming presence of healthcare companies on this list. Biotechs and pharmaceuticals have dominated the IPO market of the recent bull cycle. Of particular interest is the performance of GBT, ZYNE, DNAI and NEOS, which have all managed huge returns in the past month in spite of the overall market correction.
We have provided links to the two companies we've recently published research on Seeking Alpha, AIMT and RPD.
Should the market correction resolve itself in the coming weeks, we will post any actions we take. To date, our portfolio is in all cash. Readers of IBD will note the occurrence of a follow-through day to change the market from correction to a bull uptrend.
1. Tantech Holdings (TANH) up 623% since March 24 IPO date
2. The Global Blood (GBT) up 160% since August 11 IPO date
3. Seres Therapeutics (MCRB) up 133% since June 25 IPO date
4. Inotek Pharmaceuticals (ITEK) up 132% since Feb 18 IPO
5. Shake Shack (SHAK) up 131% since Jan 29 IPO
6. Zynerba Pharma (ZYNE) up 115% since Aug 4 IPO
7. Spark Therapeutics (ONCE) up 89% since Jan 30 IPO
8. Kempharm Inc (KMPH) up 82% since Apr 15 IPO
9. Pronai Therapeutic (DNAI) up 79% since July 15 IPO
10. Neos Therapeuritc (NEOS) up 77% since July 23 IPO
11. Chiasma Inc (CHMA) up 77% since July 15 IPO
12. Fitbit Inc (FIT) up since June 17 IPO
13. Glaukos Corp (GKOS) up 66% since June 24 IPO
14. Blueprint Medical (BPMC) up 58% since April 29 IPO
15. Kearny Financial (KRNY) up 57% since May 14 IPO
16. Wingstop (WING) up 44% since June 11 IPO
17. Solaredge Technology (SEDG) up 41% since March 26 IPO
18. Aimmune Therapeutic (AIMT) up 39% since Aug 5 IPO
19. Black Knight (BKFS) up 37% since May 19 IPO
20. Press Ganey (PGND) up 33% since May 20 IPO
21. Appfolio (APPF) up 31% since June 25 IPO
22. Summit Materials (SUM) up 30% since March 11 IPO
23. Rapid 7 Inc (RPD) up 30% since July 16 IPO
24. Entellus Medical (ENTL) up 29% since Jan 28 IPO
25. Collegium Pharma (COLL) up 26% since May 6 IPO
Once again we point out the overwhelming presence of healthcare companies on this list. Biotechs and pharmaceuticals have dominated the IPO market of the recent bull cycle. Of particular interest is the performance of GBT, ZYNE, DNAI and NEOS, which have all managed huge returns in the past month in spite of the overall market correction.
We have provided links to the two companies we've recently published research on Seeking Alpha, AIMT and RPD.
Should the market correction resolve itself in the coming weeks, we will post any actions we take. To date, our portfolio is in all cash. Readers of IBD will note the occurrence of a follow-through day to change the market from correction to a bull uptrend.
Tuesday, June 9, 2015
Screening for Growth Stock Leaders
To screen and analyze the most promising post-IPO stocks, we first group our newly IPO’d stock candidates by vintage year. For instance, in the year 2014 there were 291 US-listed IPOs. From this list of 291 stocks from the class of 2014, we can rank them by year-to-date performance (through June 4, 2015). Here’s the Top 10 stocks from this ranking:
Eagle Pharmaceuticals (EGRX) up 371.9%
Recro Pharmaceuticals (REPH) up 194.4%
Capnia (CAPN) up 191.6%
Pfenex (PFNX) up 163.8%
EHI Car Services (EHIC) up 122.3%
Corium (CORI) up 121.6%
Cheetah Mobile (CMCM) up 118.9%
Sage Therapeutics (SAGE) up 114.8%
Innocoll AG (INNL) up 110.6%
Adeptus Health (ADPT) up 104.5%
Once we have this list of stocks, it won't do to simply know which have performed the best this year. To get a best sense of how each stock has done recently, and to determine whether it is a good buy, one has to devote the time in analyzing the stock chart of each one.
To do so, we fall back again on the tried and true methods of Investor’s Business Daily. IBD’s founder, William O’Niel, long ago developed a series of chart patterns which illuminated for him the best setups for stock performance. All stocks trade through one of these patterns in any given year, and identifying them is extremely useful in picking high-percentage entry points for good price performance. While not foolproof, it has stood the test of time in its effectiveness. If you are unfamiliar with the IBD method of analyzing a stock chart, we direct you to this link for a good tutorial.
During a recent podcast of the IBD Investing Show, host Matthew Galgani shared with his listeners a handy way to organize a list of stocks by their chart pattern. He identified five types of chart patterns, which he uses to organize every stock on his watchlist. They are: strong and extended, nearing a buy point, testing a moving average, basing, and broken.
This is an ingenuous method, and one we’ve adopted. We use this method to key on those stocks which either are near a buy point or are testing a moving average. In fact, we’ve devised our preferred ranking of these five groups. They are, in order of priority:
1st choice stocks: Nearing a buy point
2nd choice stocks: Testing a moving average
3rd choice stocks: Strong and extended
4th choice stocks: Basing
5th choice stocks: Broken
If we analyze the 291 stocks which comprise the Class of 2014, we find that only 60 stocks are nearing a buy point. 60 more are testing a moving average. 50 are strong and extended (meaning they are close to their 52-week highs and arguably the best performers). The rest are either correcting in a base pattern or are broken and are trading in their own bear market.
You may ask, “Why not concentrate first on the strong and extended stocks?” The reason has to do with odds. One never knows how far and how long a breakaway stock will run. Ideally you want to buy a stock near an attractive entry point (an IBD buy point), but if you buy an extended stock, the buy point moment has passed and you run a high risk of catching the stock just before it ends its run and corrects in a base. From IBD’s analysis of countless stock winners over the past 70 years, investors have much better odds of trading into a good return if they use appropriate buy points, depending on the sort of base pattern the stock is completing. Again, refer to this link on IBD base patterns.
For this reason, we analyze the 291 stocks of the Class of 2014 once a week to identify those that are nearing a buy point. This is a laborious process, but we are seeking to find the post-IPO stocks that are poised for breakout moves. It’s the first and best screen for these possibilities.
Once we have identified the stocks nearing a buy point, we rank them by their IBD Composite Rating. This rating is a combination of IBD’s EPS growth rating (on a scale of 0 to 100), and IBD’s relative strength rating (on a scale of 0 to 100). The strongest stocks have Composite Ratings at or close to 99. For a discussion of this rating, visit this link.
Once we have ranked the stocks of the Class of 2014 by their buy point and by their Composite Rating, we then build a Discounted Cash Flow Model for the Top 10 highest ranked stocks. This analysis requires a deep-dive analysis into each company, with our own 10-year projections for revenues, expenses and margins, and a calculation of the net present value of the resulting free cash flows to derive an Intrinsic Value per share. A Discounted Cash Flow model is replete with assumptions, and our assumptions are inherently imperfect, since they must be made with subjective views on how large the company’s addressable market is, how much market share the company will capture, and how profitable its business model will be over the long term. The reason we do this is to ground our stock expectations in some framework of reality. It might only be OUR version of reality, but at least we have done the heavy lifting necessary to form an intelligent opinion about the company’s potential valuation.
Click here for a discussion of our DCF model techniques.
Once we have computed an Intrinsic Value per share for our Top 10 stocks within the Class of 2014, which are all nearing a buy point, we will then compute what we call a GSL Power Rating. This value is simple to explain. Merely add the IBD Composite Rating of the stock with its upside percentage to our DCF Intrinsic Value.
For instance, let’s assume XYZ Inc. IPO’d on June 30, 2014. It is in our Class of 2014 stocks. Last week we identified this stock’s pattern to be approaching an IBD buy point. We looked up its current Composite Rating in IBD and found it to be rated at 95. We used this rating to rank the stock versus all others that were screened to be near a buy point, and we found it to be the third best stock on our list.
We then analyzed the company’s earnings and calculated a DCF Intrinsic value per share. We found that our Intrinsic Value per share was 75% higher than the current market price.
Lastly, we simply add the stock’s IBD Composite Rating (95) with our projected upside percentage to Intrinsic Value (75), and thus arrived at a GSL Power Rating of 170 for this stock. We then rank this stock among the other Top 10 stocks according to our GSL Power Rating, and trade accordingly.
Over time, we prefer to limit our trading portfolio to no more than 10 stocks. Our initial positions are no more than 8% of our portfolio. If we use the Top 10 stock screening approach we just described across a wide universe of post-IPO stocks, we feel we are best positioned to find future market leaders early, before they make their biggest runs.
As noted several times throughout this website, William O’Neil’s great insight is that market leading stocks will usually have periods of maximum performance in a relatively compressed timeframe, usually lasting no more than 1.5 to 3 years in length. If an investor is to catch these sorts of moves before they occur, the best approach is to screen these candidates by their chart patterns first, and then prioritize and rank them with fundamental factors and assumptions.
Using this two-step approach, we screen stock candidates every week, and endeavor to publish our Top 10 stock candidates on the Seeking Alpha website. If you are interested in following our latest Top 10 stock candidates, be sure to subscribe to Seeking Alpha and follow us.
Thank you for reading this article to the end. We appreciate your time and attention and hope that you found it useful.
Eagle Pharmaceuticals (EGRX) up 371.9%
Recro Pharmaceuticals (REPH) up 194.4%
Capnia (CAPN) up 191.6%
Pfenex (PFNX) up 163.8%
EHI Car Services (EHIC) up 122.3%
Corium (CORI) up 121.6%
Cheetah Mobile (CMCM) up 118.9%
Sage Therapeutics (SAGE) up 114.8%
Innocoll AG (INNL) up 110.6%
Adeptus Health (ADPT) up 104.5%
Once we have this list of stocks, it won't do to simply know which have performed the best this year. To get a best sense of how each stock has done recently, and to determine whether it is a good buy, one has to devote the time in analyzing the stock chart of each one.
To do so, we fall back again on the tried and true methods of Investor’s Business Daily. IBD’s founder, William O’Niel, long ago developed a series of chart patterns which illuminated for him the best setups for stock performance. All stocks trade through one of these patterns in any given year, and identifying them is extremely useful in picking high-percentage entry points for good price performance. While not foolproof, it has stood the test of time in its effectiveness. If you are unfamiliar with the IBD method of analyzing a stock chart, we direct you to this link for a good tutorial.
During a recent podcast of the IBD Investing Show, host Matthew Galgani shared with his listeners a handy way to organize a list of stocks by their chart pattern. He identified five types of chart patterns, which he uses to organize every stock on his watchlist. They are: strong and extended, nearing a buy point, testing a moving average, basing, and broken.
This is an ingenuous method, and one we’ve adopted. We use this method to key on those stocks which either are near a buy point or are testing a moving average. In fact, we’ve devised our preferred ranking of these five groups. They are, in order of priority:
1st choice stocks: Nearing a buy point
2nd choice stocks: Testing a moving average
3rd choice stocks: Strong and extended
4th choice stocks: Basing
5th choice stocks: Broken
If we analyze the 291 stocks which comprise the Class of 2014, we find that only 60 stocks are nearing a buy point. 60 more are testing a moving average. 50 are strong and extended (meaning they are close to their 52-week highs and arguably the best performers). The rest are either correcting in a base pattern or are broken and are trading in their own bear market.
You may ask, “Why not concentrate first on the strong and extended stocks?” The reason has to do with odds. One never knows how far and how long a breakaway stock will run. Ideally you want to buy a stock near an attractive entry point (an IBD buy point), but if you buy an extended stock, the buy point moment has passed and you run a high risk of catching the stock just before it ends its run and corrects in a base. From IBD’s analysis of countless stock winners over the past 70 years, investors have much better odds of trading into a good return if they use appropriate buy points, depending on the sort of base pattern the stock is completing. Again, refer to this link on IBD base patterns.
For this reason, we analyze the 291 stocks of the Class of 2014 once a week to identify those that are nearing a buy point. This is a laborious process, but we are seeking to find the post-IPO stocks that are poised for breakout moves. It’s the first and best screen for these possibilities.
Once we have identified the stocks nearing a buy point, we rank them by their IBD Composite Rating. This rating is a combination of IBD’s EPS growth rating (on a scale of 0 to 100), and IBD’s relative strength rating (on a scale of 0 to 100). The strongest stocks have Composite Ratings at or close to 99. For a discussion of this rating, visit this link.
Once we have ranked the stocks of the Class of 2014 by their buy point and by their Composite Rating, we then build a Discounted Cash Flow Model for the Top 10 highest ranked stocks. This analysis requires a deep-dive analysis into each company, with our own 10-year projections for revenues, expenses and margins, and a calculation of the net present value of the resulting free cash flows to derive an Intrinsic Value per share. A Discounted Cash Flow model is replete with assumptions, and our assumptions are inherently imperfect, since they must be made with subjective views on how large the company’s addressable market is, how much market share the company will capture, and how profitable its business model will be over the long term. The reason we do this is to ground our stock expectations in some framework of reality. It might only be OUR version of reality, but at least we have done the heavy lifting necessary to form an intelligent opinion about the company’s potential valuation.
Click here for a discussion of our DCF model techniques.
Once we have computed an Intrinsic Value per share for our Top 10 stocks within the Class of 2014, which are all nearing a buy point, we will then compute what we call a GSL Power Rating. This value is simple to explain. Merely add the IBD Composite Rating of the stock with its upside percentage to our DCF Intrinsic Value.
For instance, let’s assume XYZ Inc. IPO’d on June 30, 2014. It is in our Class of 2014 stocks. Last week we identified this stock’s pattern to be approaching an IBD buy point. We looked up its current Composite Rating in IBD and found it to be rated at 95. We used this rating to rank the stock versus all others that were screened to be near a buy point, and we found it to be the third best stock on our list.
We then analyzed the company’s earnings and calculated a DCF Intrinsic value per share. We found that our Intrinsic Value per share was 75% higher than the current market price.
Lastly, we simply add the stock’s IBD Composite Rating (95) with our projected upside percentage to Intrinsic Value (75), and thus arrived at a GSL Power Rating of 170 for this stock. We then rank this stock among the other Top 10 stocks according to our GSL Power Rating, and trade accordingly.
Over time, we prefer to limit our trading portfolio to no more than 10 stocks. Our initial positions are no more than 8% of our portfolio. If we use the Top 10 stock screening approach we just described across a wide universe of post-IPO stocks, we feel we are best positioned to find future market leaders early, before they make their biggest runs.
As noted several times throughout this website, William O’Neil’s great insight is that market leading stocks will usually have periods of maximum performance in a relatively compressed timeframe, usually lasting no more than 1.5 to 3 years in length. If an investor is to catch these sorts of moves before they occur, the best approach is to screen these candidates by their chart patterns first, and then prioritize and rank them with fundamental factors and assumptions.
Using this two-step approach, we screen stock candidates every week, and endeavor to publish our Top 10 stock candidates on the Seeking Alpha website. If you are interested in following our latest Top 10 stock candidates, be sure to subscribe to Seeking Alpha and follow us.
Thank you for reading this article to the end. We appreciate your time and attention and hope that you found it useful.
Tuesday, May 12, 2015
Top 10 Performing IPOs
Since January 1, 2014, there have been 332 IPOs on either the NYSE or the Nasdaq. Earlier today we ran a screen on Bloomberg that ranked these IPOs by their returns since their IPO. Specifically, we measured the returns from the opening price on the first day of trading to today's close. Here are the top 10 stocks per this screen:
1. Atara Biotherapeutics (ATRA), up 281% since Oct 15, 2014 IPO. This company develops treatments for cancer, kidney disease and other illnesses.
2. Eagle Pharmaceuticals (EGRX) up 276% since Feb 12, 2014 IPO. The company develops a variety of specialty drugs via injectables.
3. Alder Biopharmaceuticals (ALDR) up 234% since May 8, 2014 IPO. Develops antibody therapeutics for cancer, pain, cardiovascular and autoimmune and inflammatory diseases.
4. Adeptus Health (ADPT) up 157% since June 25, 2014 IPO. Manages an independent network of free-standing emergency rooms in Texas and Colorado.
5. Inogen (INGN) up 130% since Feb 14, 2014. Sells oxygen and supplies for pulmonary disease patients.
6. Nevro Corp (NVRO) up 128% since Nov 5, 2014. Develops spinal cord therapy products to relieve pain.
7. Diplomat Pharmacueticals (DPLO) up 125% since Oct 9, 2014 IPO. Develops pharmaceuticals for complex diseases.
8. Kite Pharmaceuticals (KITE) up 119% since June 20, 2014 IPO. Develops cancer and immunotherapy products.
9. Paycom Software (PAYC) up 114% since April 14, 2014 IPO. Markets cloud-based software for the employment life-cycle.
10. 2U Inc (TWOU) up 113% since March 28, 2014 IPO. Provides a variety of online education courses.
It is interesting to note that the top 8 companies are all in the Healthcare sector. This reflects the fact that the overall IPO market of the last two years in the US has been dominated by healthcare companies, especially in the biotechnology industry. Additionally, in the first quarter of 2015, the healthcare sector within the S&P 500 Index reported the largest earnings increase year-over-year, at 22%, per FactSet. There is no doubt that we are in the midst of a healthcare revolution.
1. Atara Biotherapeutics (ATRA), up 281% since Oct 15, 2014 IPO. This company develops treatments for cancer, kidney disease and other illnesses.
2. Eagle Pharmaceuticals (EGRX) up 276% since Feb 12, 2014 IPO. The company develops a variety of specialty drugs via injectables.
3. Alder Biopharmaceuticals (ALDR) up 234% since May 8, 2014 IPO. Develops antibody therapeutics for cancer, pain, cardiovascular and autoimmune and inflammatory diseases.
4. Adeptus Health (ADPT) up 157% since June 25, 2014 IPO. Manages an independent network of free-standing emergency rooms in Texas and Colorado.
5. Inogen (INGN) up 130% since Feb 14, 2014. Sells oxygen and supplies for pulmonary disease patients.
6. Nevro Corp (NVRO) up 128% since Nov 5, 2014. Develops spinal cord therapy products to relieve pain.
7. Diplomat Pharmacueticals (DPLO) up 125% since Oct 9, 2014 IPO. Develops pharmaceuticals for complex diseases.
8. Kite Pharmaceuticals (KITE) up 119% since June 20, 2014 IPO. Develops cancer and immunotherapy products.
9. Paycom Software (PAYC) up 114% since April 14, 2014 IPO. Markets cloud-based software for the employment life-cycle.
10. 2U Inc (TWOU) up 113% since March 28, 2014 IPO. Provides a variety of online education courses.
It is interesting to note that the top 8 companies are all in the Healthcare sector. This reflects the fact that the overall IPO market of the last two years in the US has been dominated by healthcare companies, especially in the biotechnology industry. Additionally, in the first quarter of 2015, the healthcare sector within the S&P 500 Index reported the largest earnings increase year-over-year, at 22%, per FactSet. There is no doubt that we are in the midst of a healthcare revolution.
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