It was a banner year for new stocks. In all, 268 companies came public and the average return was about 21%. This compares to a 13% gain in the S&P 500 and a 15% gain in the Nasdaq Composite.
Of all the new stocks that hit the market, there were 24 that posted gains of more than 100%. Interestingly enough, only five of these were tech operators. Biotech was particularly strong — 18 deals in that sector returned more than 100%, more than in any other sector.
No doubt, the market for new stocks was far from perfect. Consider that 18 offerings lost more than half their value. As for the worst deal, it was Amedica (AMDA). The company lost 87% for the year.
So what were the top new stocks for 2014? Let’s take a look at five of them:
Best New Stocks: Radius Health Inc (RDUS)
For new stocks, Radius Health Inc (RDUS) was the best performer for 2014, although the deal got off to a rocky start. RDUS stock priced its offering at $8, which was below the range of $14 to $16. The return on the first day of trading was a measly 0.1%!
But since then, RDUS stock has been a rocket. A key was that the company recently announced positive results from its Phase 3 trial for Abaloparatide-SC, which is a treatment for postmenopausal women with severe osteoporosis. In mid-2015, the company will submit a new drug application (NDA) with the FDA as well as a marketing authorization application in Europe.
And yes, the opportunity is massive. The National Osteoporosis Foundation estimates that about 10 million people in the U.S. have osteoporosis and about 43 million are at risk for the disease. In fact, it is responsible for 2 million fractures each year, costing patients and insurers about $19 billion.
Best New Stocks: TubeMogul Inc (TUBE)
The IPOs for ad networks have been mostly awful. But TubeMogul Inc (TUBE) stock has been able to buck the trend.
The company operates an enterprise software platform that leverages real-time data to deliver video ads. But it has also recently used its programmatic system to deliver traditional TV ads with the launch of TubeMogul PTV. This added more fuel to TUBE stock.
It also helps that the company’s core business continues to grow at a hefty pace. In the latest quarter, revenues soared by 112% to $21.7 million. The net loss also dropped from 42 cents per share to 3 cents per share. The Street was looking for revenues of $21.7 million and a net loss of 26 cents per share.
But it looks like TUBE stock will not lack for any long-term growth. Consider that Magna Global forecasts that digital video advertising will jump from $8.3 billion in 2013 to $22.5 billion by 2017.
Best New Stocks: GoPro Inc (GPRO)
There was little doubt that GoPro Inc (GPRO) stock would do well. But so far, the results have been a surprise to many on Wall Street. After all, the market cap is a hefty $8.4 billion and the multiple on GPRO stock is 201 times earnings.
A decade ago, GoPro started as a developer of durable cameras to allow athletes to document themselves. But over time, the products have become more mainstream.
And the results have been stunning. In the latest quarter, revenues surged by 45.7% to $192.1 million and operating income came to $13.5 million. All in all, it looks like GoPro will be one of the biggest beneficiaries of the holiday season.
But there are many bears on GPRO stock, with about 19% of the float in short positions. Besides the sky-high valuation, there are several red flags for investors to consider. GPRO stock will likely feel some pressure from the increased competition, such as from Garmin Ltd. (GRMN), Sony Corp (ADR) (SNE) and Ion. Even Apple Inc. (AAPL) may jump into the fray.
What’s more, it is far from clear if GPRO will have much success in monetizing its video content.
Best New Stocks: Zendesk Inc (ZEN)
Zendesk Inc (ZEN), which operates a cloud platform for customer service, pulled off its IPO in mid-May, which came after a major correction in tech stocks. To help with the offering, the company’s venture capitalists — Charles River Ventures, Benchmark Capital Partners and Matrix Partners — agreed to purchase $25 million of ZEN stock.
And it worked. ZEN stock popped 49% on its first day of trading and then went on to post more lucrative gains.
The company does not fit the typical mold of a tech startup. Consider that the company got its start back in 2007 in Copenhagen. At first, Zendesk was mostly a hobby but it kept growing.
The co-founder and CEO recently wrote about the journey in his new book, Startupland. He talks about the fanatical focus on customer needs but also the importance of simple design. Oh, and he recounts how Zen nearly went bust several times.
For the most part, Zendesk has been able to keep up its rapid growth ramp. In the latest quarter, revenues spiked by 76% to $33.9 million.
Best New Stocks: CyberArk Software Ltd (CYBR)
On its debut in September, CYBR shares soared 87%. But it was not the end of the run. The stock would just keep on climbing.
Then again, CYBR stock has benefited from the overall interest in cybersecurity. As seen with the massive hack of Sony’s systems, there are many terrible threats for corporations. It seems inevitable that CEOs are scrambling to figure out how to protect their data.
As for CYBR, the company develops software that helps deal with hacks that have penetrated the enterprise. Essentially, the focus is on making sure that privileged accounts remain safe.
CYBR has had little trouble ginning up interest in its technology. In the latest quarter, revenues shot up by 66% to $28 million. There was also a GAAP profit of $3.3 million. About 35% of the Fortune 100 and 17 of the world’s top 20 banks use CyberArk software.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.