How to Own Every "Hot IPO" For Less Than $50

By Lou Basenese, on Tuesday, July 7, 2020

I recently shared a strategy to profit from a corner of the market traditionally reserved for Wall Street’s elite:

Initial Public Offerings, or IPOs.

My strategy doesn’t involve begging your broker for IPO shares like an incessant teenager.

Instead, it involves a five-pronged approach to uncover overlooked and undervalued opportunities — essentially, hidden IPO gems.

But that kind of research is a lot of work. So, understandably, many readers wrote me asking for an easier way to profit from IPOs.

Well, eventually, I ended up identifying just what they’re looking for:

A little-known way to own a stake in the majority of the market’s best-performing IPOs…

For under $50!

But before I share it with you, let me explain why it’s so important that you consider it…

IPO Boom Times

Make no mistake, bull markets are good for the IPO market.

Consider:

  • As the market rebounded from the coronavirus selloff in March, 38 IPOs hit the market in the second quarter, raising a total of $15 billion.
  • Nearly every IPO upsized its offering or priced above the midpoint.
  • Each IPO spiked an average of 38% higher on the first day, and then continued to rally. By the end of the quarter, the average IPO was up more than 60% from its offering price.

Furthermore, there were specific pockets of even stronger performance…

For example, look at Biotech IPOs, a sector I predicted would be a top performer in 2020.

The average gain for the 23 biotech IPOs this year? A staggering 80% above the offering price.

What’s more, the bulk of this return came after the first day of trading.

Who wouldn’t want a piece of this profit bonanza?

That’s where the Renaissance IPO ETF (IPO) comes in…

Hit the IPO “Easy” Button

Launched in 2013, this ETF offers investors access to roughly 80% of newly public companies with a single purchase.

Best of all, the selection process it uses is extremely dynamic.

By that I mean the portfolio is constantly refreshed to make sure it includes the market’s hottest IPOs.

More specifically, companies are added as quickly as five days after an IPO. Other additions are evaluated every quarter until the company has been trading for 500 days.

The quicker companies pass three initial screens (for size, liquidity, and shares available for trading), the sooner they get added to the portfolio.

Furthermore, current positions are reviewed quarterly for removal, based on the same criteria.

But once a company has traded for 500 days, it’s automatically removed from the portfolio or from consideration.

The end result is a portfolio of roughly 50 of the market’s highest-growth companies at any given time.

And the performance speaks for itself…

Year-to-date, the IPO ETF is up 35% versus a 3% decline for the S&P 500.

And for the last three years, it’s up 67% versus a 37% rise for the S&P 500.

These gains come cheap, too:

This ETF is currently trading for less than $50, and its expense ratio is just 0.6%.

That’s a bargain for such a customized and niche approach.

The Only Rub

When we look at the market cap breakdown of this ETF, roughly 70% of the portfolio is in large-cap companies. The remaining 30% is in mid-cap companies.

What about small- and micro-caps? That’s the only glaring weakness here.

But that’s where the five-pronged strategy I laid out in June comes into play…

Sorry, but uncovering triple-digit IPO winners requires some work!

But for those looking for a hassle-free way to get access to IPOs, there’s no better option than the Renaissance IPO ETF (IPO).

So instead of missing out on the action, consider adding this ETF to your portfolio.

Ahead of the tape,
Lou Basenese
Lou Basenese

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