3 Backdoor IPO Investments You Need to Know Today

Investing in an IPO can be risky, but we have a safer strategy to profit from IPOs without having to own a single share of a newly publicly traded company...

It's a "backdoor" IPO investments strategy that involves buying stock of a supplier to a company that's about to go public.

Some of our readers who followed this strategy have already netted gains of 31% since May. In comparison, the Dow Jones Industrial Average gained just 7% since then.

ipo investments

But if you missed out on these profits, that's okay. Each of the three backdoor investments are expected to climb by at least 25% in the next 12 months.

In fact, one could climb nearly 50%.

Yes, we know that may not sound as exciting as investing directly in an IPO and hoping for triple-digit returns.

But recent highly anticipated IPOs have not panned out well for retail investors.

For example, shares of Snap Inc. (NYSE: SNAP) opened at $24 per share to the public on March 2. If those same retail investors still held their shares today, they'd be down 36.66% from their original investment.

However, this IPO investment strategy gives you the ability to profit from the company going public and the stability of a stock that's already trading...

Follow These 3 Backdoor Investments for Safer Profits

Private companies have to rent out office space and pay other companies for data storage. By owning stock in the companies that provide these essential services, you can profit from the growth an IPO creates without the risk.

And as a private company expands it business and plans to go public, its need for offices and data storage can increase. In fact, one of the companies we're about to discuss added 130,434 square feet in leasing space when it was expanding in 2014.

That means suppliers will make money off a company going public, no matter what happens during the IPO.

Also, these suppliers have multiple income sources, which makes them much less risky to own. Even if a newly traded company were to go out of business, the supplier would still have other customers.

But finding these suppliers can be difficult for retail investors. It requires extensive research or access to expensive data-tracking services.


The Pros and Cons of IPOs

That's why we've done the research for Money Morning readers and found three backdoor profit opportunities for IPO investments.

The three investments on our radar are suppliers for Uber, Airbnb, and Spotify. Uber is expected to go public between 2019 and 2021, and Airbnb and Spotify could go public in 2018.

However, you don't have to wait for Uber, Airbnb, and Spotify to go public before making an investment.

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You could start profiting from these backdoor plays today, and you can bag returns of 50% over the next year...

Backdoor IPO Investments No. 3: Hudson Pacific Properties Inc.

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As Uber grows, it will need more office space.

And because Uber's headquarters are in San Francisco, it will need to pay a lot of money to rent out properties in the city and expand its campus.

According to Investopedia, San Francisco is the second most expensive city in the United States, with the average home costing $820,000 inside the city. That also means business space comes at a premium.

That creates a backdoor strategy of making money from the ride-hailing app without owning a single share of Uber stock. This strategy involves a lot less risk because you'll avoid the volatile price swings that accompany public offerings.

Through extensive research, I found a real estate investment trust (REIT) that leases space to Uber.

In 2013, Uber signed a lease with Hudson Pacific Properties Inc. (NYSE: HPP) for an 88,134-square-foot space in San Francisco. The ride-hailing app grew so fast that it leased another 130,434 square feet in 2014 at the San Francisco location, according to BizJournals.com.

If Uber wants to create a campus like Apple Inc. (Nasdaq: AAPL) or Facebook Inc. (Nasdaq: FB) after a successful IPO, it could lease one of Hudson's other San Francisco properties, Rincon Center, which has over 580,000 square feet.

Uber is also locked into that lease until 2024, which means seven more years of revenue from just one business. Uber accounts for 3.2% of Hudson Pacific's revenue, according to FactSet.

And that solid revenue stream has analysts bullish on HPP stock...

Of the analysts who cover HPP, 73% recommend it as a "Buy" or "Overweight" in September. On Aug. 25, brokerage firm D.A. Davidson & Co. placed a "Buy" rating on HPP with a one-year price target of $40.00.

From today's opening price of $31.99 per share, that's a potential profit of 25.03%. On top of that, HPP also pays its shareholders a dividend of $0.25, which is a yield of 3.13%.

Backdoor IPO Investments No. 2: Hortonworks Inc.

One of Spotify's major suppliers for data management is a little-known company called Hortonworks Inc. (Nasdaq: HDP). Spotify appointed Hortonworks to support its largest commercially used cluster in Europe in 2013 because of Hortonworks' expertise.

But with a market cap just over $1 billion, many investors likely haven't heard of this California tech company.

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But that's okay - it means Money Morning readers could profit the most.

Hortonworks creates, distributes, and supports enterprise data management software solutions. The Hortonworks Data Platform allows its customers to collect, store, process, and analyze existing data.

And because of its expertise, Hortonworks has an impressive client list that includes Bloomberg, eBay Inc. (Nasdaq: EBAY), and Expedia Inc. (Nasdaq: EXPE).

As of September 2017, 73% of the analysts covering HDP recommend it as a "Buy." That's up 10% from the 63% of analysts who recommended it as a "Buy" in May 2017.

Now, if you listened when we first brought HDP to the attention of Money Morning readers on May 19, you could have made a profit of 31.88%. In comparison, the Dow Jones has climbed just 7.08% in that time.

But the good news is there's still time to net even more gains.

Asset management firm Needham has a one-year price target of $25 per share, which means HDP shareholders could profit as much as 49.25% in the next 12 months.

Backdoor IPO Investments No. 1: Box Inc.

When I researched the Airbnb supply chain, I discovered cloud storage company Box Inc. (NYSE: BOX) is one of its major suppliers. According to Box, Airbnb employees use Box as a company-wide tool to increase productivity by easily sharing documents and images.

You see, companies would rather pay to use a cloud computing service than build their own infrastructure. A systems administrator to run a company's cloud could cost $120,000 or more per year, which doesn't include salary benefits.

There's also hardware needed to store the data, electricity to power it, and bandwidth needed to make it all work reliably.

The costs can add up quickly.

Some of Box's business plans cost as little as $5 per month for secure file sharing and collaboration.

And the trend of "renting" cloud services is only going to grow...

For 2016, Statista projected global revenue for the enterprise cloud computing market was $48.7 billion. By 2019, that's expected to skyrocket to $80.7 billion in revenue.

That's a 65.70% increase in three years.

That's great news for Box, but it's even better news for shareholders. Over the next 12 months, investment banking firm Drexel Hamilton expects the BOX stock price to climb to $28 per share.

From today's opening price of $18.69, that's a potential profit of 49.81%.

Up Next: The Gains Keep Coming

Subscribers who have been following along with these recommendations are racking up wins at a dizzying pace.

Nine gains in one week alone... 30 triple-digit gains this year... 46 triple-digit wins in the last 12 months...

Profits like that can be life-changing. Learn all about High-Velocity Profits here - and get in position for the next winner now.

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