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Bright Spots in 2012’s Dull IPO Market

It hasn't been a great year overall, but these deals are standouts


According to a recent piece on, the IPO market was a dud for 2012. While companies raised over $45 billion — which was the best performance since 2007 — about $16 billion came from the Facebook (NASDAQ:FB) deal. And 178 transactions were withdrawn or postponed.

Despite all this, there are still reasons to be optimistic. After all, a variety of sectors saw lots of strength — and the success may continue into the new year.

Panic Buying Hits Facebook
Panic Buying Hits Facebook

So, let’s take a look:

Real Estate: After the plunge in 2007 and the long depression since then, the housing market has come back to life this year. Just look at the performance of the homebuilders like KB Home (NYSE:KBH), Ryland (NYSE:RYL) and Hovnanian (NYSE:HOV). All have clocked 100%+ returns.

Real estate IPOs have certainly benefited as well. In October, Realogy (NYSE:RLGY) pulled off its offering and has since realized a gain of 35%. The company is the No. 1 residential real estate services company in the U.S. with core brands like Century 21, Coldwell Banker, ERA, Sotheby’s International Realty and Better Homes & Gardens Real Estate. Realogy’s market share is about 26%.

Another hot deal was Restoration Hardware (NYSE:RH). Just a few years ago, it looked like this furniture retailer would go bust. But management refocused the company on the luxury market, which was a savvy move. From fiscal 2009 to fiscal 2011, net revenues have climbed by 53% to $958.1 million, and adjusted EBITDA has soared by 356% to $80.2 million.

What about the IPO? The return is about 48%.

Mortgage operators also made some strong public offerings. Home Loan Servicing Solutions (NASDAQ:HLSS) has posted a gain of 39%, and Nationstar Mortgage Holdings (NYSE:NSM) is up a sizzling 97%.

Health: As seen with Whole Foods (NYSE:WFM), the market for healthy foods is still growing at a nice pace — and making investors’ pocketbooks fatter.

One IPO that capitalized on this trend is Annie’s (NYSE:BNNY). Founded in the late 1980s, the company has become a top player in organic packaged foods, such as macaroni and cheese, snack crackers, fruit snacks and graham crackers. Annie’s products are available in over 25,000 retail locations, such as Costco (NASDAQ:COST), Target (NYSE:TGT), Wal-Mart (NYSE:WMT) and yes, Whole Foods. Since coming public in late March, Annie’s shares are up about 88%.

This was not the only success story. Natural Grocers by Vitamin Cottage (NYSE:NGVC) is up 43% from its public offering. The company, which is a specialty retailer of organic and natural groceries, has 55 stores in 11 states (mostly in the Western U.S.).

Cloud: This is a megatrend in the tech world that allows for the delivery for software via the Internet. The approach tends to have lower costs and better performance.

The cloud isn’t new and has seen a variety of great IPOs over the years, such as (NYSE:CRM). But the good times have continued into 2012. One hot deal was Workday (NYSE:WDAY). The company develops enterprise resource planning (ERP) software that helps companies manage their human resources, inventory and financials. The co-founders were also pioneers of the industry, having built PeopleSoft into a mega-success.

Workday is up 81% since its IPO.

ServiceNow (NYSE:NOW) also turned in a great performance. Since coming public in January, the stock is up about 133%.

The company develops software for info-tech operations management. It’s a large market, with players like BMC (NYSE:BMC), CA (NYSE:CA) and Hewlett-Packard (NYSE:HPQ). However, these companies have been slow to adopt the cloud.

ServiceNow CEO Frank Slootman is no stranger to disrupting traditional tech markets. He did the same thing to the tape-based storage market while leading Data Domain. He took that company public in 2007 and sold it to EMC (NYSE:EMC) in 2009 for $2.4 billion.

Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”  Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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