ETFs to Play 2014's Most-Anticipated IPOs

02/17/2014 7:00 am EST

Focus: ETFs

As the IPO market continues to heat up, Daniela Pylypczak of ETFdb.com offers ideas to play what could be a lucrative market.

This is a duplicate of an ETFdb.com original article which is located here...

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:

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

Care.com

World's largest online marketplace for family care

Content/Portal

Coupons.com

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


ETF Plays
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.

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

IPOX-100 Index Fund (FPX): This fund is designed to measure the performance of US 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 (ZTS), Facebook (FB), and Realogy Holdings Corp. (RLGY).

By Daniela Pylypczak of ETFdb.com

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