3 Still-Young Stocks Among 2021's Price Leaders
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While DoorDash (NYSE: DASH) and Airbnb (NASDAQ: ABNB) are among the recent IPOs with the most buzz, they’re actually being trounced in the price-performance department by slightly older IPOs OneMain Holdings (NYSE: OMF), Customers Bancorp (NYSE: CUBI) and InMode (NASDAQ: INMD).
It’s tempting to jump into the latest big-name IPO that you’re hearing about. It’s understandable that you don’t want to miss out on gains that only early investors can enjoy. But how soon do you have to get into a stock if you want to participate in powerful rallies?
It’s often difficult for individual investors to get a piece of a new IPO, as the investment banks and other institutions get first crack at the newly issued shares. It’s a bit easier with a direct listing, which is becoming more popular these days.
Even so, it’s still the case that some stocks rocket higher immediately after going public and then take months or even years to regain that prior high.
Fortunately, even if you like a stock’s potential and want to get in early, you can wait before grabbing shares. Researchers have found that stocks tend to deliver their biggest gains within their first 15 years of being public. That’s the period of time when companies are still nimble, have innovative products and services, and a management team that’s open to creative ways of growing the business.
OneMain Holdings is a lender specializing in the subprime credit market. It went public in October 2013, so it’s well within that 15-year range. The stock advanced 10.80% in the past three months, 34.95% year-to-date and 188.75% in the past 12 months.
Growing institutional sponsorship has pushed the price higher, as the number of mutual funds owning shares grew to 654 in the most recent quarter, up from 499 three quarters ago.
After climbing out of its Covid base, the stock notched a strong rally, trending steadily higher along its 50-day moving average. It broke out of a flat base in late April, clearing a buy point above $57.50.
It’s currently holding above its 50-day line and may offer a new buy point above $61.90.
Customers Bancorp also went public in 2013. The holding company for Customers Bank operates 23 locations, most in Pennsylvania, but also in several other eastern states.
The stock rebounded not only from the pandemic-driven broad market pullback, but also from a decline that actually began in 2017.
Shares rallied to an all-time high of $43.86 on June 7, before pulling back to find solid 50-day support. That’s a good sign that institutional investors, whose ranks have been growing, are holding shares rather than bailing out.
Shares ran up 110.84% year-to-date and 242.54% in the past year. With the current correction, shares are down 5.80% in June.
The stock could offer a new buy point if it surpasses that June 7 high in heavy volume, or if volume picks up in subsequent sessions if the stock tacks on more gains.
Earnings growth accelerated in the past three quarters, and revenue accelerated in the past two, with double-digit revenue gains in the past seven quarters.
InMode is an Israel-based company that makes equipment used in cosmetic surgery. Shares went public in August 2019.
The stock gapped up 12.54% Monday, after the company boosted full-year revenue and earnings guidance. It also said it expected record revenue for the second quarter, in the range of $86.5 million to $87 million. InMode is set to report its second quarter on July 28, before the market open.
Both sales and earnings accelerated in the past two quarters.
After gapping up, shares rallied to a new high in Tuesday’s session, then retreated $3.52, or 3.24% on Wednesday. Fortunately, upside volume on both Monday and Tuesday were greater than in Wednesday’s downside trade.
The stock may be buyable on the pullback. For investors who choose to enter a position now, watch for support at or above the 50-day line, and be prepared to cut losses if the stock gives up its gains from the gap-up
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