ETF Trends
ETF Trends

As the U.S. market begins to look a little bit healthier, initial public offerings have started to gain more momentum. You can play the revived IPO market with one exchange traded fund (ETF).

The tech sector has experienced the largest shifts in IPO offerings, with companies in China faring a lot better.

Paul Bard, vice president of research at Renaissance Capital in Greenwich, commented that “tech IPOs over the course of 2010 have definitely had ups and downs,” with “a pocket of strength in March, followed by some tough sledding in April/May as the broader markets sold off,” writes Benjamin Pimental for MarketWatch. Tech IPOs started gaining momentum “more significantly over the last three months with tech/growth IPOs in particularly far outperforming their slow-growth or less exciting IPO counterparts,” Bard adds. [IPO ETF: Signs of Life.]

The biggest anticipated name in the tech market is Skype, but larger social-networking names like Facebook and LinkedIn have yet to announce a public offering. Other notable IPO offerings include, Invensense, which dabbles in motion sensing and processing tech; Demand Media, an online media rental site; and Zipcar, a car-sharing services provider.

Bard notes that “investors have been quite vocal in what they are looking for, which is secular growth, a strong business model, and a large market opportunity and trading liquidity.” Investors have also been sensitive to IPO prices, “with virtually 50% of all IPOs year-to-date pricing below their originally anticipated range,” Bard comments. IPOs for semiconductor companies have fared the worst so far this year.

Still, Renaissance Capital reports that IPO filings are up fourfold to date, as the backlog reaches its highest level since 2007, indicating increased activity for both issuers and investment banks.

The number of deals coming through is increasing, with six companies filing last week alone, reports Lynn Cowan for The Wall Street Journal. U.S. IPOs have averaged 7.2% on first-day gains so far this year while Chinese issuers have averaged 11.7% returns. Currently, 105 IPOs are registered with the Securities and Exchange Commission, compared to 38 in 2009.

For more information on the IPO market, visit our IPOs category.

  • First Trust IPOX-100 Index Fund (NYSEArca: FPX) is up 9.4% in the last three months; its top holdings include Visa (NYSE: V), Philip Morris (NYSE: PM) and Time Warner Cable (NYSE: TWC); its top two sectors are consumer discretionary (35%) and financials (19.8%); energy gets 12.7%. Technology accounts for 6.7% of the ETF.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.