IPOs Are Re-Awakening; How Can You Play It With ETFs?
April 29th at 3:00pm by Tom Lydon
Initial public offerings (IPOs), along with related exchange traded funds (ETFs), have been in a drought, but it may receive renewed attention as more companies see the success of recent IPOs.
There hasn’t been much activity in the IPO market since August, but with three public stock offerings this month, most notably Rosetta Stone Inc. (RST) and its price increase of 44% since then, the IPO slumber may be over, writes Jeff Benjamin for Investment News.
Industry analysts see investment opportunities in companies that can successfully pull off a public offering in times of economic uncertainty.
Some analysts are seeing this increase in IPO activity as a strong indicator of market confidence at the institutional-investor level.
Other companies have been biding their time in offering shares, but the success of recent IPOs may show that the waters are safe to dive into.
- FirstTrust IPOX 100 Index (FPX): up 2.6% year-to-date
Fortunately, this ETF was designed to withstand inactivity in the IPO market. FPX tracks an index of the 100 top IPOs in the United States, measuring their performance by market cap. The fund rebalances quarterly. IPOs are added in on their seventh day of trading, to capitalize on a long-term “buy and hold” perspective. On their 1,000th day, they’re shuffled out and new stocks are added.
Max Chen contributed to this article.
