'Tis the Season for IPOs!

 
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The Easiest Way to Play the IPO Boom

Matthew Carr | Chief Trends Strategist | The Oxford Club

Matthew Carr

The late, great artist Prince famously sang, "Tonight, I'm going to party like it's 1999!"

And this year, the initial public offering (IPO) market is taking that advice. It's partying like it's 1999... and there's no sign it's about to stop.

US IPOs by Year
 

In the pre-pandemic world of long ago, 2020 was poised to be one of the busiest years in a long time for IPOs. But when COVID-19 started throwing haymakers in February and March, we weren't sure that was going to be true anymore.

In fact, the markets hit the pause button on IPOs for roughly two months after touching the bottom in March.

But as the broader markets regained their footing and soared higher, IPOs took off. And they have only continued to gain speed.

A Stampede of Unicorns

The enthusiasm is palpable.

In fact, December has been one of the busiest months for IPOs in two decades.

It's all part of a closed loop of optimism.

As the major indexes soar to new highs, more companies feel comfortable jumping into the public waters and riding the wave higher.

We've seen a bevy of unicorns - companies valued at $1 billion or more at IPO.

And there have been some jaw-dropping one-day winners as the pent-up demand for these issues triggers monster runs.

It's been one rocketing debut after another.

Unity Software (NYSE: U) and Palantir Technologies (NYSE: PLTR) had fantastic debuts.

In June, Royalty Pharma (Nasdaq: RPRX), which collects royalties from pharmacies, was briefly the largest IPO of the year.

It was then overshadowed by Snowflake (NYSE: SNOW). The company raised $3.4 billion on its IPO and became the largest software IPO ever!

C3.ai (NYSE: AI) opened up 138% above its IPO price.

 

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Then food delivery service DoorDash (NYSE: DASH), a competitor of Grubhub (NYSE: GRUB) and Uber Eats, launched 86% higher on its debut. It was the largest IPO of 2020... for a day.

Airbnb (Nasdaq: ABNB) jumped more than 115% on its first day of trading. The company now has a more than $86 billion market cap. That not only makes it larger than competitors like Booking Holdings (Nasdaq: BKNG) and Expedia (Nasdaq: EXPE), but blows past the valuations of major hotel chains.

Is this euphoria or a sign of the new economy?

Only time will tell.

One-Stop IPO Shop

Of the top 10 all-time debuts by companies valued at more than $1 billion, five have taken place in 2020.

There hasn't been this level of participation and demand in IPOs since 1999...

And we still have Affirm, Roblox and Wish - among plenty of smaller names - before the year's end.

Not to mention, an IPO we've long been waiting for here - Weedmaps - is about to take place. WM Holding Company, which operates the online listing marketplace for cannabis consumers, is merging with Silver Spike Acquisition Corp. (Nasdaq: SSPK) to directly list to the Nasdaq.

The new company will be valued at $1.5 billion.

But wait... there's more!

2021 will continue the hectic pace of IPOs, including possible listings from Robinhood and SpaceX! These will undoubtedly be monster debuts.

Now, you can go after all of these IPOs individually. But that's going to cost you a pretty penny as the number of listings soars.

Or you can capture pieces of hot IPOs all at once with the Renaissance IPO ETF (NYSE: IPO). The booming debut market of unicorns has triggered a fantastic run-up in the fund's shares.

Renaissance IPO ETF Chart
 

Shares have more than doubled in 2020. And they've tripled since their low in March.

The exchange-traded fund (ETF) has previously held Alphabet (Nasdaq: GOOGL), Facebook (Nasdaq: FB) and Under Armour (NYSE: UAA).

Its largest holdings right now are Moderna (Nasdaq: MRNA), Uber Technologies (NYSE: UBER), Zoom Video Communications (Nasdaq: ZM) and Pinterest (NYSE: PINS).

But it also holds great names like Beyond Meat (Nasdaq: BYND), Chewy (NYSE: CHWY), Peloton Interactive (Nasdaq: PTON), Royalty Pharma, Snowflake, Vroom (Nasdaq: VRM) and more.

The ETF adds the most liquid IPOs and reflects the top 80% of newly public companies. After two years - when they become "seasoned companies" - they're removed.

It's one of the best hassle-free ways to add the latest and greatest IPOs to your portfolio.

Even though the pandemic attempted to rain on the parade, 2020 was a banner year for IPOs. And that momentum is going to carry through 2021.

I believe all investors should have some exposure to these young highfliers. But don't put all your eggs in one basket!

Here's to high returns,

Matthew

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