Beyond Meat (NASDAQ:BYND) was one of the flashiest IPO stocks of the year, with actress Jessica Chastain coming to ring the opening bell. Ever try any of its meat alternatives? I was skeptical. I try to eat healthy, whole foods — and stuff like the Boca burger is just terrible. But I did try Beyond Meat’s version of “Italian sausage.” I have to admit, it was pretty good.
I guess a lot of other people agree. In the latest quarter, Beyond Meat’s revenues were up 214% year-over-year to $40.2 million, and its IPO in May was a massive hit. And it’s got plenty of company:
- Chewy (NYSE:CHWY), the online pet food shop backed by PetSmart, is up 50% two weeks after its IPO.
- Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) got everyone’s attention. And if the stocks got off to a rocky start, well… so did Facebook (NASDAQ:FB).
- Then there’s Pinterest (NYSE:PINS) and Fiverr (NYSE:FVRR)…
- And before long, we’ll be adding Airbnb and Peloton to the list.
IPO stocks as a group are outpacing the broader market 2-to-1. So it’s definitely a hot market right now. And now let’s talk about how to play the IPO game right.
Here’s the thing: Most of us never get a shot at buying a true IPO. Almost all of those shares go to company insiders and the brokerage firms helping the company go public. Institutions usually get about 90% of the shares, with the rest going to brokers’ biggest clients.
So for practical purposes, when we talk about IPO stocks to buy, we’re really talking about buying shares of a company after it starts trading. That’s fine.
Early on, stocks can swing depending on a variety of factors: media hype… how well the offering was priced… how many shares are available… the “lockup period” before early investors can cash out… the first earnings report… and more.
I always say at Investment Opportunities that we’re after huge long-term profits — so we let the early madness play out. And I use that time to put my IPO analytical model to work.
Three months after Elixinol Global (OTCMKTS:ELLXF) went public, it earned my buy signal. It’s up 68% for my subscribers now.
Eleven months after its IPO, I recommended MTech Acquisition. Then, after last week’s merger that turned the company into Akerna (NASDAQ:KERN), our patience was rewarded — we made 153%… then 546%.
Both stocks are part of a huge, global mega-trend — in this case, marijuana legalization. But before you invest, you’ve got to look under the hood.
What to Look For in IPO Stocks
One thing you’ll hear me talk about is profitability. That’s definitely one of the key factors in a successful IPO.
Now, don’t get me wrong: I don’t necessarily need to see huge profit margins right now.
Just look at Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX). Some years, they post no profits. That’s because they continually invest in growing their businesses… which allows them to increase their market share and hammer their competitors. So, investors buy them hand over fist… not because of the current profits, but because they expect massive profits in the future. And AMZN and NFLX are up more than 1,000% since 2010.
The key is a clear path to future profitability. There must be a sustainable business model that can generate cash in the future. If not, then pass on it.
Ultimately, I expect recent IPOs to pass five critical tests before I’d consider any of them to be stocks to buy. Click here for more about these criteria and the opportunities I see now.
Timing is Everything
Once I’ve found a high-quality stock among the crop of recent IPOs, I then determine WHEN to buy. Because ultimately, success means having the right idea — at the right time. Just ask early investors in Facebook, who were underwater for over a year… before the stock took off for the stratosphere.
So, I not only want IPO stocks to meet my five criteria; I want to get the timing right. That’s what I designed my Cannabis Cash Calendar system to do specifically for marijuana IPOs.
Legalization is still working its way across the country (and the world), which means that for most successful companies, their biggest gains are yet to come. Oftentimes, you can buy tomorrow’s leaders for just pennies a share, or maybe a few dollars.
I’m about to release my next Cannabis Cash Calendar recommendation on July 8. You can get exclusive access to it the moment it is released to my Investment Opportunities readers. Click here to learn more and get on the list to be notified.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.