They may not have the price history or be fully immune to blustering tweets, but if you want stacked odds for successful investing, three stocks to buy are recent initial public offerings: Pinterest (NYSE:PINS), Zoom Video (NASDAQ:ZM) and Beyond Meat (NASDAQ:BYND).
Buying IPO stocks on the open market is no guarantee of getting in on the ground floor and having the next Microsoft (NASDAQ:MSFT), Netflix (NASDAQ:NFLX) or Apple (NASDAQ:AAPL) in one’s hands. It’s not that simple. Still, when early investor demand is present, innovation is rampant and shares are part of a secular trend, IPOs can be solid stocks to buy.
And in today’s market PINS stock, ZM and BYND are three companies that fit the bill and are well positioned for much larger future success.
Pinterest is the first of our three IPO stocks to buy. PINS stock is a hugely popular web-based visual discovery platform that collects and shares ideas and activities. In turn, this enables and empowers users to build upon their own experiences.
This innovative platform is poised for long-term growth despite being in a crowded consumer-facing digital economy. Pinterest already has more monthly active users than Twitter (NYSE:TWTR). The company is also growing its digital ad revenues by nearly 60% and roughly twice the pace of Facebook (NASDAQ:FB).
And as InvestorPlace’s Luke Lango notes, Pinterest solves the search shortcomings of a platform such as Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google through its visual-first Pins which allow for personalization and contextualization even in the absence of a specific search.
But that’s not all that makes this the first of our three stocks to buy. As the price chart shows, PINS is in demand by investors.
In its short time as publicly traded stock, shares are up nearly 25% from its opening price. Following a simple multi-day pullback pattern that found support off the 62% retracement level, Pinterest shares are in position to be purchased.
My recommendation is to buy PINS stock on confirmation of Monday’s pivot low as shares trade through $30, set your sights for profit-taking at $36 and use a drop below $28 as a blended approach to manage risk.
Zoom Video (ZM)
The second of our stocks to buy is ZM stock. Zoom Video is a comprehensive platform for video, voice, chat and content sharing. If you’re thinking that’s not exactly new technology, you’d be correct. But Zoom is breaking the mold in a business trend that’s only going to continue growing.
Zoom’s mission of making its meetings better than in-person sit-downs is a new wrinkle in the space and it’s proving wildly popular. Revenues are up more than five-fold over the past couple years to more than $330 million and cash flow from operations last year tallied in at $51.3 million.
The big knock against buying ZM stock right now could be investor demand is too anxious. In its first couple weeks of trading, shares have continued to set new highs. And a price-to-sales multiple of around 47X, which InvestorPlace’s Tom Taulli recently cautioned against, has ballooned to nearly 61X.
The daily chart shows ZM stock’s ever-expanding price-to-sales figure has occurred within a very constructive-looking uptrend. But given Zoom’s stretched multiples, daily price volatility that’s not for the squeamish and trend persistence fully capable of turning into its own worst enemy, today’s buyers need to be careful.
Currently, Zoom is a stock to buy in more aggressive trading accounts if new highs are made. This type of entry is based on price momentum and trends lasting longer than most investors give them credit for.
To avoid that eventual day of reckoning, which turns into something even painfully larger, I’d suggest using a trailing stop tied to the ZM stock’s uptrend line.
Beyond Meat (BYND)
The third in our list of stocks to buy is the market’s most recent IPO. Remember the Wendy’s ad campaign, “Where’s the beef?” Ironically enough and in the emerging trend of consumer and environmentally conscious eating, it’s looking like it’s in shares of Beyond Meat.
Wall Street’s bulls have been devouring BYND stock like there’s no tomorrow since going public late last week at $25 a share. In fact, Thursday’s debut marked the hottest IPO by a major U.S. company in nearly two decades. And shares of Beyond Meat are up roughly double their opening print in less than a week. It’s a lot to be sure, but can we blame investors for their enthusiasm?
Beyond Meat’s protein-packed, plant-based meat alternatives offer consumers burgers, chicken and even sausage food products that are selling like hotcakes. And while this innovator will obviously face competition such as privately held Impossible Foods, the benefits of a healthier you, me and planet from buying into this incredibly important trend are beyond reproach and bode well for a first-mover like BYND stock.
BYND stock has hit $82 in early trade Tuesday following Wall Street’s first sell-side recommendation, “new outperform” from Bernstein and price target of $81. The firm sees the faux meat market growing to more than $40 billion over the next decade.
On the price chart, the sizzle in the third of our stocks to buy is, however, a bit too well-done for our taste. With shares already piercing Bernstein’s 12-month price target, having the patience to wait for a pullback is advised.
No matter how delicious Beyond Meat products are or how exciting this obvious growth market might be, to avoid being grilled as a BYND stock investor, at a minimum I’d suggest waiting for those “grill lines” on the 30-minute chart to sear a few other bulls before buying shares.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.