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We've seen approximately 80 IPOs here in 2006 so far. Combined, the group has returned an average of 1%, hardly impressive. There have been winners though. Let's take a quick look at the top 10% gainers from IPO pricing here in 2006 and see if we can find any trends.

1 - Chipotle (CMG) - 181%. This market has been so difficult that even the most successful offering of 2006 recently had a busted secondary. I was quite high on CMG pre-IPO, the valuation in the $60's though is awfully aggressive. 55 X's '07 estimates with 20% expected revenue growth.

2 - Fortunet (FNET) - 86%. As is often the case each year, a few of the top 10 best performers actually price their ipos under pricing range. One of the best kept 'secrets' when it comes to ipos is that the best time to buy them is often when no one wants them. FNET is banking on their mobile gambling device in Las Vegas and the aggressive estimates are assuming solid revenues from the device beginning late '06.

3 - Calumet Specialty Products (CLMT) - 54%.
One that priced well within range and opened flat. Again most assume that to make money in ipos one must chase the 'hot' money, we'll see though that most in the top 10 priced in or below range and were available in the aftermarket within $1 from pricing. CLMT is a structured MLP refiner paying a hefty yield. These high yield energy MLP's have been among the best performers overall this decade. We've recently seen a number of lower yielding MLP's struggle, but those that pay 45 cents+ quarterly yield continue to perform well overall. These type ipos have been the best spot to be in the 2000's, something you really won't read anywhere but here.

4 - H&E Equipment Services (HEES) - 52%. HEES IPO'd right in the middle of a bull run for it's group. It has pulled back recently, still up strong from pricing.

5 - Liquidity Services (LQDT) - 48%. A little internet company pricing mid-range and opening at pricing.

6 - Pacific Airport Group (PAC) - 44%

7 - LoopNet (LOOP) - 35%. The most recent on the list, another small internet company.

8 - American Railcar Industries (ARII) - 32%. The 1st railcar IPO after '05's 'IPO of the year' RAIL.

9 - Nextest Systems (NEXT) - 28%.
Small tech company, priced low end of range.

10 - Koppers Holding (KOP) - 27%
. Another that priced at low end of range, KOP is the only one in the top 10 with significant debt levels.

Some common themes in '06 from this list:

1) Other then PAC, the other 9 on the list all had offerings of under 11 million shares. The larger offerings are just not working in 2006, not thus far at least.

2) Other then KOP, the highly leveraged IPOs are nowhere to be seen. Debt mutes stock performance period, especially when that debt is laid on to enrich a leveraged buy-out operation. One can save themselves a lot of money over time if they simply skip the highly leveraged IPOs across the board.

3) 6 on the list priced mid-range or below and 5 of those were available within $1 of pricing. 2006 has not been a year to chase price, not at all.

Large offerings that have opened with enthusiasm are completely absent from the list other then PAC. PAC listed in the US/Mexico, so it has been the exception in another way as well.

I would expect a similar pattern for the rest of 2006. Unless one can gain hefty allocations of desired offerings, I suspect the way to make money in the IPO market in the second half of 2006 will be to find the interesting sub 11 million share offerings with little to no debt that price mid-range or below.

Those buying offerings way up on open this year have gotten hit hard: CROX/THI/VSE as well as brand names ZZ/MRT all priced strong, opened well up and fell quickly/hard. Not to mention other bulky offerings like VG/HIMX both 30+ million share offerings that don't seem to have a bottom.

LQDT/CLMT/FNET/NEXT/KOP/LOOP all priced mid-range or below and all but LOOP opened right near pricing. All 6 though are in the top 10 performance though while the larger offerings with more fanfare have thus far failed.

2006 has so far been the year to skip hype/attention and focus on small and quiet. I see that continuing, very much so.

Source: Top Ten IPOs of 2006 So Far