Here's Where IPOs Are Still Crushing the Market by 40%

Forbes... "Why WeWork Won't Work - Hello, Neumann!"

Bloomberg... "Endeavor Makes Last-Minute Call to Yank IPO as Conditions Sour."

The mainstream financial media is clearly having a bearish moment when it comes to initial public offerings (IPOs). In story after feature story, you're bombarded with the idea that anyone who's excited about a big-name IPO is just setting themselves up for disappointment.

On paper, that narrative makes sense. WeWork's attempt at a $47 billion debut was farcical; its valuation plummeted to $14 billion before the offering was abandoned... and the CEO fell on his sword.

Then there's Peloton Interactive Inc. (NASDAQ: PTON). Shares dropped 11.2% in its first day of trading on Sept. 26 - a decline that, according to The Wall Street Journal, directly influenced the decision of Endeavor Group talent firm to put off its own IPO. Insiders were obviously terrified of "poor market conditions."

But these were simply two bad IPOs, two expensive failures that had Wall Street wringing its hands.

The truth is tech and life sciences firms are still IPO leaders; that segment of the market is actually doing much better than stocks overall.

And if you snatch up the shares I'm about to recommend, you'll be ahead, too...

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These Problems Don't Add Up to a Trend

Now then, I love to remind investors that to make money from the wealth machine that is high tech, you really need to filter out the noise.

That's become particularly important these days when you look at the few recent high-profile IPO failures.

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Besides Peloton, which makes interactive exercise cycles, ride-sharing firms Lyft Inc. (NASDAQ: LYFT) and Uber Technologies Inc. (NYSE: UBER) also suffered declines after they went public several months ago.

Were Uber, Lyft, Peloton, and WeWork disappointing? Absolutely - and they were costly, too.

Disappointments like those are the basis of so-called "trends" that headline writers simply love. It's easy to pull clicks by writing sensationalist soundbites about how the mighty have fallen.

But those soundbites are by no means indicative of the market as a whole.

Dealogic says 2019 is still on track to be the richest year for IPOs since 2014. The firm says companies going public in the United States so far this year have raised $52.7 billion. That's the best we've seen since the similar period back in 2014, when American firms raised $77 billion.

All that said, IPOs do present savvy tech investors with a bit of a dichotomy.

On the one hand, IPOs are one of the great drivers of innovation in this country. Silicon Valley startups are geared around a profitable exit strategy that often means issuing stock to the public.

And of course, nothing keeps a bull market moving forward like a group of new stocks to trade. These exciting opportunities have a way of pulling fresh cash into stocks, particularly tech stocks.

But the thing is, in the first six months of trading, these companies' shares are also very volatile equities. Most investors don't have the discipline to make a simple move like, say, a "Lowball Limit Order." A lowball would enable them to catch IPOs when they retreat from their highs but are still young enough to run up several thousand percent the way Apple Inc. (NASDAQ: AAPL), Inc. (NASDAQ: AMZN), and Microsoft Corp. (NASDAQ: MSFT) all did.

I'm always researching the very best tech and science IPOs for my paid-up Nova-X Report subscribers; I teach tactics like the "Cowboy Split" and "Lowball Limit" that can slash risk and boost profitability by double digits, too.

But there's one IPO play I can show everyone that's absolutely crushed the broad market over the long haul.

In one move, you can capture outsized returns, all the energy driving American innovation, and a restful night's sleep, to boot.

Only the Very Best IPOs Are Accepted Here

I'm talking about the First Trust US Equity Opportunities ETF (NYSEArca: FPX). The fund's managers say they've captured 85% of the value of all stocks that have gone public over the past four years.

That's a pretty comprehensive approach that almost no retail investor can match.

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Strictly speaking, FPX doesn't specialize in new tech or life sciences stocks. Instead, it seeks to mirror the broad market for new issues.

Now, I love tech stocks - and 60% of FPX holdings are in tech and life sciences - but the added exposure is a good thing. FPX gives us a good combination of tech-centric stocks and broad diversification. That makes it a great "twofer."

With a fund that holds roughly 100 stocks, FPX also gives us access to finance, autos, retail, heavy industry, and energy.

The average market cap is $8.9 billion, small enough to offer lots of price appreciation but large enough to have healthy liquidity and volume. And the managers have been smart enough to acquire stocks at enviable entry points.

Take a look at some of the exciting tech names FPX holds:

  • Alcon Inc. (NYSE: ALC) is the world's largest eye-care health company, and it has a big demographic trend in its favor. Alcon estimates that 5 billion people could be nearsighted by 2050. That's half the planet's projected population. The firm is getting double-digit sales growth from emerging markets, driven by China, Brazil, and Russia, as greater affluence leads to more spending on eye care.
  • Hewlett-Packard Enterprise Co. (NYSE: HPE) is a play on artificial intelligence (AI) and supercomputing. It's a legacy firm that traces its roots to the original Hewlett-Packard Co. founded in Palo Alto, Calif. - that's Silicon Valley - back in 1939. Hewlett-Packard is a spin-off from that firm and recently joined forces with another famous player in the field. Last May, it said that it's buying supercomputing legend Cray. Accenture says AI-driven supercomputing will boost economic activity by $8.3 trillion in the United States alone by 2035.
  • Okta Inc. (OKTA) provides cloud-based security for a roster of famous clients like The Western Union Co. (NYSE: WU), Fresh Del Monte Produce Inc. (NYSE: FDP), and the Federal Communications Commission. It's also partnered with industry giants Amazon Web Services (AWS) and Palo Alto Networks Inc. (NYSE: PANW). It boasts a total client roster of more than 7,000 companies. They are no doubt attracted by the fact that Okta gives them access to more than 6,000 pre-built cyber integrations.
  • PayPal Holdings Inc. (NASDAQ: PYPL) is a one-stop shop for cutting-edge commerce tools, offering clients a range of payment and commerce solutions that used to be reserved for big players - like lightning-fast mobile card readers, intuitive point-of-sale systems, invoicing software, business funding, and smart analytics. In 2014, the fast-moving firm bought mobile payments app Venmo, which is popular with millennials and gives it a long-term client base.

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Recently trading at around $75.89, FPX is actually priced cheaper than many of its portfolio holdings. And for all its performance, you won't pay a premium to own it; the management fees on the fund come in just shy of 0.6%. This makes it an extremely cost-effective way for retail investors to cash in on an IPO market that's stronger - much stronger - than the media suggests.

How much stronger? Well, depending on the time frame you're working with, FPX generally beats the S&P 500 by anywhere from 15% to 40%.

So let the financial media frown on IPOs all they want. In my view, that only makes FPX even more attractive. It's a screaming buy at these levels, and if you happen to already own it, by all means, add to your position before 2019 is out.

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About the Author

Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...

  • He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
  • He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
  • As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.

This all means the entire world is constantly seeking Michael's insight.

In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.

Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.

And even with decades of experience, Michael believes there has never been a moment in time quite like this.

Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.

To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.

His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.

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