Scouting the Latest IPOs

Just like opening day at the ballpark, investing in new IPOs holds the potential for shining promise and crushing disappointment. If you simply can't bear to just cheer on your favorites from the sidelines, at least be careful about investing in this league. Many new issues swing for the fences during their first trading days, only to slump once marketing hype has given way to mundane earnings reports.

Don't commit an error by stocking your entire portfolio with rookies. Allocate just a small percentage of your risk capital to IPOs. Scout your potential phenoms carefully, and be choosy about composing your own rotisserie league. Investing with an eye for a season extending long beyond opening day will reward you with quality players capable of staying in the game. With that in mind, we offer our Foolish scouting report of the latest IPOs.

Last week's games

Winner: Employers Holdings

• Ticker: NYSE: EIG
• Industry: Insurance provider
• Deal terms: 26.75 million shares, $17 per share
• Lead manager: JPMorgan
• Filed: Dec. 4
• Opening day: Jan. 31, opened at $20, closed at $19.97, 17.5% gain
• Bleacher banter: Priced above its proposed range of $14-$16 per share and increased its offering size by 3.75 million shares

Runner-up: Animal Health International

• Ticker: Nasdaq: AHII
• Industry: Animal health product distributor
• Deal terms: 11.8 million shares, $11 per share
• Lead manager: JPMorgan
• Filed: Sept. 28
• Opening day: Jan. 31, opened at $12, closed at $12.45, 13.2% gain
• Bleacher banter: Priced at midpoint of its proposed range

Duncan Energy Partners L.P.

• Ticker: NYSE: DEP
• Industry: Oil and gas services provider
• Deal terms: 13 million units, $21 per unit
• Lead managers: Lehman Brothers and UBS
• Filed: Nov. 2
• Opening day: Jan. 31, opened at $22.50, closed at $23.05, 9.8% gain
• Bleacher banter: Priced at high end of its proposed range

HFF

• Ticker: NYSE: HF
• Industry: Real estate services provider
• Deal terms: 14.3 million shares, $18 per share
• Lead managers: Goldman Sachs and Morgan Stanley
• Filed: Nov. 9
• Opening day: Jan. 31, opened at $18.15, closed at $18.70, 3.9% gain
• Bleacher banter: Priced above its proposed range of $15-$17 per share

XTENT

• Ticker: Nasdaq: XTNT
• Industry: Medical device maker
• Deal terms: 4.7 million shares, $16 per share
• Lead manager: Piper Jaffray
• Filed: Nov. 8
• Opening day: Feb. 1, opened at $16.15, closed at $16.48, 3% gain
• Bleacher banter: Priced at low end of its proposed range

Molecular Insight Pharmaceuticals

• Ticker: Nasdaq: MIPI
• Industry: Biotech
• Deal terms: 5 million shares, $14 per share
• Lead managers: RBC Capital Markets and Jefferies
• Filed: Nov. 8
• Opening day: Feb. 2, opened at $14.10, closed at $14.09, 0.6% gain
• Bleacher banter: Priced at low end of its proposed range

On deck
3S Bio Inc.

• Proposed ticker: Nasdaq: SSRX
• Industry: Chinese biotech
• Proposed deal terms: 7.7 million American depositary shares, $12-$14 per share
• Lead manager: UBS
• Filed: Jan. 19

Accuray

• Proposed ticker: Nasdaq: ARAY
• Industry: Medical device maker
• Proposed deal terms: 13.3 million shares, $14-$16 per share
• Lead managers: JPMorgan and UBS
• Filed: Nov. 13

Cellcom Israel

• Proposed ticker: NYSE: CEL
• Industry: Israeli cellular services provider
• Proposed deal terms: 19 million American depositary shares, $16-$18 per share
• Lead managers: Goldman Sachs, Citigroup, and Deutsche Bank
• Filed: Jan. 17

Fortress Investment Group

• Proposed ticker: NYSE: FIG
• Industry: Asset manager
• Proposed deal terms: 34.3 million shares, $14.50-$16.50 per share
• Lead managers: Goldman Sachs and Lehman Brothers
• Filed: Nov. 8

J.A. Solar Holdings

• Proposed ticker: Nasdaq: JASO
• Industry: Chinese solar cell manufacturer
• Proposed deal terms: 15 million American depositary shares, $12.50-$14.50 per share
• Lead managers: CIBC World Markets and Piper Jaffray
• Filed: Jan. 16

Mellanox

• Proposed ticker: Nasdaq: MLNX
• Industry: Israeli semiconductor manufacturer
• Proposed deal terms: 6 million shares, $12-$14 per share
• Lead managers: Credit Suisse and JPMorgan
• Filed: Sept. 28

National CineMedia

• Proposed ticker: Nasdaq: NCMI
• Industry: In-theater network operator
• Proposed deal terms: 38 million shares, $18-$20 per share
• Lead managers: Credit Suisse and Lehman Brothers
• Filed: Oct. 13

Optimer Pharmaceuticals

• Proposed ticker: Nasdaq: OPTR
• Industry: Biotech
• Proposed deal terms: 5.3 million shares, $12-$14 per share
• Lead managers: Piper Jaffray and Jefferies
• Filed: Nov. 9

Switch & Data

• Proposed ticker: Nasdaq: SDXC
• Industry: Interconnection services provider
• Proposed deal terms: 11.7 million shares, $14-$16 per share
• Lead managers: Deutsche Bank and Jefferies
• Filed: Sept. 27

Synta Pharmaceuticals

• Proposed ticker: Nasdaq: SNTA
• Industry: Biotech
• Proposed deal terms: 6 million shares, $14-$16 per share
• Lead managers: Bear Stearns and Lehman Brothers
• Filed: Nov. 27

U.S. Auto Parts Network

• Proposed ticker: Nasdaq: PRTS
• Industry: Auto parts reseller
• Proposed deal terms: 10 million shares, $10-$12 per share
• Lead managers: RBC Capital Markets and Thomas Weisel
• Filed: Nov. 2

VeriChip Corporation

• Proposed ticker: Nasdaq: CHIP
• Industry: Radio frequency chip provider
• Proposed deal terms: 4.3 million shares, $6.50-$8.50 per share
• Lead manager: Merriman Curhan Ford
• Filed: Dec. 29, 2005

Games of the Week
If last week's solid performances didn't inspire you, this week's array of interesting offerings just might.

Among the players going to bat are Cellcom Israel, the leading Israeli telecom; 3SBio, a profitable Chinese pharmaceutical; and Accuray, the only maker of commercially available intelligent robotic radiosurgery systems. And don't forget J.A. Solar Holdings, a Chinese manufacturer of solar panels hoping to achieve the financial success of Solarfun Power Holdings and Trina Solar, two competitors that went public several months ago and have been performing well.

Of particular note is the offering by Fortress Investment Group, which will mark the first IPO of a diversified U.S. private equity and hedge fund. The New York-based company, organized in 1998, has seen its assets grow from $1.2 billion at the end of 2001 to $29.7 billion at the end of last September, and net income growth from $40.3 million in 2003 to $192.7 million in 2005. Nomura Holdings (NYSE:NMR) recently purchased 15% of the company.

The offering involves a piece of the lucrative pie of management fees and investment income from the Fortress family of hedge and private equity funds. The company anticipates paying dividends equaling about 75% of its annual distributable income.

While an investment in Fortress could bring glamour to your portfolio, don't expect it to serve as a conservative bulwark. Earnings over time will likely be volatile, reflective of the alternative investment experience.

The company hopes to raise up to $635 million, and shares are expected to begin trading on Thursday. A successful offering could herald an influx from other hedge funds.

As always, make sure you do your own warm-ups and read through a company's offering documents -- including the risk factors -- before getting in on the game!

Warming up in the bullpen
Opnext, a telecom component manufacturer, announced deal terms of 16.9 million shares at $13-$15 per share. The lead manager is Goldman Sachs, and the deal is expected to price the week of Feb. 12.

Quadra Realty Trust, a real estate investment trust, announced deal terms of 16.7 million shares at $15-$17 per share. The lead managers are Credit Suisse and Wachovia, and the deal is expected to price the week of Feb. 12.

Targa Resources Partners, a telecom component manufacturer, announced deal terms of 16.8 million units at $19-$21 per unit. The lead managers are Citigroup, Goldman Sachs, UBS, and Merrill Lynch.

Sent down to the minors
No company announced postponements of planned offerings last week.

Minor-league developments
Get ready, get set ... not yet! The latest filings announced during the last week include:

Cinemark Holdings

• Proposed ticker: NYSE: CNK
• Industry: Movie theater operator
• Proposed deal terms: Not yet determined
• Lead managers: Lehman Brothers
• Filed: Feb. 1

Disabled list
Tube City IMS, a provider of outsourced services to steel mills, withdrew its planned offering.

Champions
Meet our current champs. Among companies that went public during the last 12 months, these firms' percentage returns from their offer prices to their most recent closing prices rank them as the top five players:

Benchwarmers
Now meet our current benchwarmers -- that's nicer to say than "losers," isn't it? Among companies that went public during the last 12 months, these firms' percentage returns from their offer prices to their most recent closing prices rank them as the bottom five players:

Groupies and fan clubs
If you don't want to declare your loyalties for specific players, but still want to enjoy the action, consider subscribing to an IPO-focused mutual fund or exchange-traded fund. Of course, do your scouting homework here, too, and make sure you read their prospectuses before buying season tickets.

Last week, all our players gained, with the First Trust IPOX 100 (AMEX:FPX), an ETF, up 2.6%, just trailing the 2.7% advance of the Russell 2000. The IPO Plus Aftermarket (FUND:IPOSX), a mutual fund, rose 1.1%, while the Nasdaq gained 1.7%.

Keep reading the Fool to see how your favorite players perform as they mature!

We're publicly offering further Foolishness:

• The IPO Lock-Up Period
• IPOs Gone Wild

Sources: Renaissance Capital's IPOhome.com, SEC filings, and Reuters.

Fool contributor S.J. Caplan roots for the Cleveland Indians when her husband is watching, and for the Boston Red Sox when he leaves the room. She holds no financial position in any firms or funds mentioned here. Omrix Biopharmaceuticals is a Motley Fool Rule Breakers pick, and JPMorgan Chase is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.