2011 hasn't been kind to companies going public. So far, only about 20% of companies that had IPOs this year are in the black, and as of the end of last week, the average loss on IPOs since their first-day trading close has been 20%.
But below, I'll reveal five stocks that are up an average of 35%. In the second of a four-part series on 2011's IPO class, we'll examine the five best-performing companies that started trading publicly this year. Take a look at the five worst IPOs here for a quick comparison.
Rules of the rankings
One adjustment I think is important reflects the fact that ordinary investors like you and me can't usually get in at the "official" IPO price. LinkedIn is a good example: Those lucky enough to get in at the IPO price of $45 are sitting pretty, but those who paid the opening price of $83 or the first-day closing price of $94.25 have big losses right now. So to make these results more realistic, all companies rated here are measured from the close of their first day onward. I also restricted eligibility by market cap, with only companies currently valued at more than $500 million making the cut.
First-Day Closing Price
Most Recent Closing Price
Change From First-Day Close
|GNC Holdings (NYSE: GNC )||$2.89 billion||$16.75||$27.03||61.4%|
|Spirit Airlines (Nasdaq: SAVE )||$1.18 billion||$11.55||$16.36||41.7%|
|Fusion-io (NYSE: FIO )||$2.45 billion||$22.50||$29.11||29.4%|
|CVR Partners (NYSE: UAN )||$1.58 billion||$17.55||$21.76||24.0%|
|Tesoro Logistics (NYSE: TLLP )||$845 million||$23.50||$27.89||18.7%|
Source: IPO Scoop and Yahoo! Finance.
Let's take a closer look at these companies, counting up from No. 5 to No. 1.
(Moving the) oil, that is
Tesoro Logistics was spun off from oil refiner Tesoro, which has no dividend but a much lower P/E. Is the company shipping the oil that much more important than the company making it useful? The market seems to think so, and Motley Fool's CAPS players are more bullish on Tesoro Logistics than they are for any other pipeline stock. Still, when valued at a big premium to your parent's multiple, you've got high expectations to live up to.
Growing crops and growing profits
CVR Partners is our dividend superstar, with a 10.5% yield to go along with its growth. Fellow Fool Jim Royal tabbed it for success within weeks of its IPO, and he's been right -- when adjusted for dividends, CVR's up 29% since its first day. Operating margins tend to be robust in the fertilizer industry, and fertilizer is essential to modern farming methods.
CVR has a few legs up on most competitors: It's ideally located in the Corn Belt, and has manufacturing advantages as well. Terra Nitrogen (NYSE: TNH ) is similarly positioned in the industry, and a quick glance at its history should give CVR investors something to smile about for the long term.
Fusion isn't just science fiction
Data-storage start-up Fusion-io has been off to a galloping start, even though it fell more than 25% last week from its peak on Nov. 17. Are investors worried that their peers are a little overeager for a company with a triple-digit P/E? The company's got the Woz on board, but there's precious little financial history to analyze. Its solid-state solution seems to be challenging some major players, but don't forget that computer hardware, especially hard drives, is a brutally competitive industry. There are a lot of questions surrounding this company, but a lot of potential.
Landing is the hard part
Discount airline Spirit has had a much better year than many of its rivals. In the time it's appreciated by nearly 42%, AMR had fallen by 75% -- before declaring bankruptcy this morning. Its niche focus on leisure travel has brought consistent profitability, but that may be threatened by a recent bill introduced in the U.S. Senate. If Spirit can fly through this legislative turbulence, it might become a truly rare sight in the airline sector -- a good investment.
Pump up your portfolio
I admit, as a fitness freak, I was at first flabbergasted by GNC's rise. People still pay those outrageous prices for tubs of protein and "special vitamins"? Then I looked at the company's numbers. GNC has earned double competitor Vitamin Shoppe's revenues over the last year; its net margin is also higher and its free cash flow has been very healthy. With a forward P/E of just 16, GNC might outdo itself next year. If anything, its IPO pricing was too low! That's a rarity in a year of manufactured first-day pops and unsustainable valuations.
Stay tuned for the year's most overrated IPOs tomorrow, as well as a few with some great potential for 2012 and beyond. Add these companies to your Watchlist to keep track of their progress in 2012.