ETFs to Play 2014′s Most Anticipated IPOs

by on February 3, 2014 | ETFs Mentioned:

In 2013, investors saw a slew of big-name companies going public, including Twitter (TWTR), The Container Store (TCS), Potbelly (PBPB), and Noodles & Co. (NDLS). While some of these IPOs had somewhat of a rough start, others have displayed very promising signs for investors. Already, several well-known companies have announced their plans to go public sometime in 2014. For those looking to tap into this lucrative market, we highlight this year’s most anticipated IPOs, as well as the ETFs to play them [see also Macro Report: 2014's Fastest Growing Economies]:

2014 IPO Watchlist

According to Renaissance Capital–a well-known global IPO investment advisor, as well as the issuer of IPO–this year should see a slew of IPO activity. In its Annual Review, the firm noted: “With positive investor sentiment, low volatility levels and improving economic conditions setting the stage for another strong year for US stocks, we expect the US IPO market to remain healthy in 2014.”

Below is a list of Renaissance Capital’s most anticipated upcoming IPOs:

 Technology IPOs
Company Business Industry
Arista Networks Sells 10 GbE switches for cloud-computing data centers Local Networks
Box Web-based cloud storage provider Internet-Software World’s largest online marketplace for family care Content/Portal Digital network of printable and online coupons E-commerce
Good Technology Provides mobile device management and security to enterprises Internet-Software
IO Data Centers Next-generation modular data center technology Software/Syst.
Rubicon Project Online ad tech firm with the largest reach on the internet Internet-Software
SilkRoad Technology Provides cloud-based HR software for enterprises Software
Square Mobile electronic payment service Financial Services
Zoosk Online dating site with 25 million searchable members Content/Portal
 Consumer IPOs
Checkers Drive-In US hamburger chain with more than 800 restaurants Restaurants
Claire’s Global jewelry and accessories retailer for young women/teens Retail-Specialty
Focus Brands Multi-branded franchisor and operator of over 3,800 eateries. Restaurants
GoPro Leading producer of wearable activity cameras Electronics
J. Crew NY-based apparel retailer for men, women and children Retail-Apparel
Jawbone Manufactures Bluetooth headsets and JAMBOX speakers Electronics
Papa Murphy’s Fifth largest pizza chain in the US Restaurants
Southeastern Grocers Operates 685 grocery stores in the Southeast Supermarkets
Warby Parker Sells $95 prescription eyeglasses and offers $50 eye exams Retail-Specialty
Zoes Kitchen Operates 75 fast-casual Mediterranean-inspired restaurants Restaurants
 Other IPOs
CBS Outdoor Americas Spin-off of CBS’s American outdoor advertising division Business Services
IMS Health Provides health care data on diseases, treatments and costs Health Care
La Quinta US hotel operator with more than 830 locations Consumer
Markit Provides financial data, valuations and trade processing services Financial
OneWest Bank Southern CA-focused bank with $26 billion in assets Financial
Mercury Payment Payment processor in the US and Canada Financial
Santander Consumer Provides originations and auto loan servicing Financial


IPOs may be attractive to ETF investors for two simple reasons. First and foremost, IPOs have a tendency to generate stellar returns on their first day of trading and investors naturally want an opportunity to buy into a stock that may one day turn out to be the next Apple (AAPL) or Google (GOOG); second, historical data reveals that IPOs as a whole have delivered impressive returns since the stock market bottom in March of 2009. As such, investors may want to take a closer look and consider the IPO market as an asset class, rather than a stock-by-stock picking challenge [see 4 Contrarian ETF Plays for 2014].

Currently, there are two ETFs that focus exclusively on initial public offerings:

IPOX-100 Index Fund (FPX, B-): This fund is designed to measure the performance of U.S. companies that have recently gone public – specifically, those that are within their first 1,000 trading days after an IPO. Currently, FPX holds 100 newly listed stocks; top holdings include AbbVie, General Motors, Facebook, Phillips 66 and Kinder Morgan.

Renaissance IPO ETF (IPO): This ETF is linked to the Renaissance IPO Index, which is a benchmark designed to hold the largest, most liquid newly listed domestic IPOs. This ETF’s portfolio is rebalanced regularly and removes securities after they have been publicly traded for two years (slightly less time than FPX’s 1,000 day threshold). Currently, IPO’s portfolio consists of 60 individual securities, which include Zoetis, Facebook, and Realogy Holdings Corp.

Follow me on Twitter @DPylypczak.

Disclosure: No positions at time of writing.