Last year, many of the most widely anticipated initial public offerings (IPOs), Lyft (NASDAQ: LFYT) and Uber (NYSE: UBER) chief among them – proved to be duds as investors lost patience for growing, but unprofitable companies.
All things considered, the Renaissance IPO ETF (NYSEArca: IPO) posted a stellar performance in 2019 and it’s on a roll to start to 2020. IPO seeks to replicate the price and yield performance of the Renaissance IPO Index, which is a portfolio of companies that have recently completed an initial public offering (“IPO”) and are listed on a U.S. exchange.
“The Renaissance Capital IPO ETF, a basket of the most recent 60 or so larger IPOs, is at a historic high. It has dramatically outperformed the S&P 500 this year, up nearly 9% versus a gain of about 3% for the S&P,” reports Bob Pisani for CNBC.
Inside IPO…The ETF
IPO tracks the rules-based Renaissance IPO Index, which adds sizeable new companies on a fast entry basis and the rest upon scheduled quarterly reviews. Companies that have been public for two years are removed at the next quarterly review.
Additionally, the Renaissance IPO ETF is the only ETF focusing exclusively on the U.S. IPO Market. Renaissance Capital believes that IPO reinvents IPO investing by providing access to the U.S. IPO Market through an ETF, without investors having to buy IPOs individually.
Broadly speaking, 2019’s crop of IPOs was disappointing from the standpoint of money raised as well as the aforementioned lack of profitability, but the IPO market is heating up early this year.
“The IPO market is now heating up again, with recent filings from Reynolds Consumer (Reynolds Wrap and Hefty trashbags) and OneMedical (health clinics). They may soon be joined by Casper (mattresses), which has filed to go public but not yet set out a term,” according to CNBC.
At the end of last year, Uber and Lyft combined for 13.7% of IPO’s weight, a boon for the fund this year as those ride-hailing stocks are up an average of 19%.
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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.