When the markets go into correction mode, recent initial public offerings get whacked. Because IPOs tend to carry more risk, investors are more likely to dump them when fear is high.
And recently, we’ve gotten a pretty stark reminder of that.
Over the past few weeks, a number of IPOs have been bludgeoned pretty hard. Consider that year-to-date, roughly half of the 222 U.S.-listed IPOs are in negative territory, with 81 currently sporting double-digit losses.
But look on the bright side: These corrections mean that investors have a chance to get attractive IPOs at a nice discount.
Here are three IPOs that are worth considering while they’re still on sale:
Fallen IPOs #1: Everyday Health (EVDY)
IPO Price: $14 per share
Return Since IPO: -14%
Everyday Health (EVDY) operates a digital content platform for health and wellness. A key part of the company’s strategy has been to lock up agreements with well-known physicians like Dr. Sanjay Gupta and world-renowned medical institutions such as the Mayo Clinic. And that has provided some reach — EVDY reaches some 90% of all oncologists and hematologists in the U.S.
Lackluster growth — the company saw last quarter’s revenues grow just 11% year-over-year to $41.4 million — has weighed on this IPO’s shares. But some factors may help boost performance.
First, Everyday Health should benefit from increased demand on the part of pharma companies for advertising and sponsorships. These companies are facing tough headwinds, such as stricter requirements on sales to doctors as well as patent expirations.
EVDY also is focusing on finding customers from mobile devices, and in its most recent quarter, it garnered 63% of visits from mobile.
What’s more, the issues and complexities of healthcare will require trusted authorities (see: the Ebola scare, where social media has proven it’s lacking).
There are several long-term catalysts for EVDY stock, and thanks to woeful performance, shares are reasonably priced too. EVDY trades at 14 times next year’s earnings, which compares favorably to a 30 price-to-earnings ratio for rival WebMD Health (WBMD).
Fallen IPOs #2: Ally Financial (ALLY)
IPO Price: $25 per share
Return Since IPO: -13%
Ally Financial (ALLY), which got its start nearly a 100 years ago, was the financing arm of General Motors (GM). However, the bank eventually entered businesses such as subprime mortgage, which helped bring things to ruin during the financial crisis.
Not only was ALLY forced to get a $5 billion bailout loan from the government, but the bank had to get a pair of other infusions as well, bringing the total to over a staggering $17 billion.
However, Ally has gotten back on track through a radical transformation, and it looks like the federal government will end up making a tidy profit.
Shareholders might, too.
The key driver for ALLY stock is that the company is essentially a pure play on the fast-growing, lucrative auto lending market. Over the years, the company has reduced its dependence on GM and Fiat Chrysler (FCAU) and diversified its base. Ally now has about 16,000 dealers within its system and serves about 4 million retail customers. About one out of every 18 new cars is financed from the company.
ALLY stock also should benefit from the company’s innovation efforts. For example, the company has sold over 4.4 million cars through its SmartAuction business, which has a highly popular mobile app.
In Q2, Ally reported earnings of 42 cents per share, up 24% year-over-year. But profits might be poised for even stronger growth thanks to a continued ramp in the U.S. economy, a plunge in interest rates (putting the cost of capital at rock-bottom levels), and attraction of top-notch investors such as billionaire Dan Loeb, whose Third Point hedge-fund firm took a 9.5% stake in ALLY stock early this year.
Fallen IPOs #3: Vivint Solar (VSLR)
IPO Price: $16 per share
Before its IPO in late September, Vivint Solar (VSLR) — which offers solar installations — looked like it could be the next SolarCity (SCTY), but investors got burned. VSLR stock tumbled from a high of $18.70 to a low of $9.66.
Still, things look sunny going forward.
Vivint Solar is already the No. 2 player in the U.S. behind only SCTY, and it got there thanks to good strategy on several fronts:
VSLR’s installations are offered without any upfront costs. Instead, a customer will pay an ongoing amount for 20-years, which is generally at 15% to 30% savings compared to typical utility rates. The company also is finding traction with its door-to-door selling strategy.
Growth has been staggering, with first-half 2014 revenues skyrocketing by 4X to $10.1 million, and it looks like the growth opportunity is in its early stages. According to GTM Research, solar energy has penetrated just 1% of the residential market, and forecasts that the compound annual growth rate for installed capacity will be a hefty 37% from 2012 to 2018.
And there might even be a short-term catalyst for Vivint Solar. The company’s quiet period will expire on Nov. 10, and the company’s underwriters will be allowed to publish analysts’ reports. These typically are more upbeat than not, and could spark VSLR stock to a nice pop.
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.