Despite beginning the year in one of the worst recessions in years, the IPO market been surprisingly strong with a diverse group of companies hitting the Street running. Of the IPOs that began trading in 2009, a large number are China-related. The market is passed the stage of pushing every stock with the word China in its name higher, but the real growth continues to be heavily populated country. A breakdown of a few of the IPOs is below.
Duoyuan Global Water (DGW) - Began trading on 6/24 after pricing at $16 per share. The stock ran up to the mid-$20’s in the first week of trading and has held steady since. The company is a maker of water treatment equipment in China that includes wastewater treatment and water purification. One of my favorite long-term investment themes involves water and water-related stocks. The ties DGW has to China make the stock even more attractive because the country has major water issues and will have to address them in the years to come. The most recent Chinese stimulus package is actually going after upgrading infrastructure and will be a boost for DGW.
Changyou.com (CYOU) - Sticking with the China theme, CYOU is a Chinese gaming company. The stock began trading on the NASDAQ on 4/2 and was priced at $16 per share, the high end of the range. Since going public, the stock has risen as high as the mid-$40’s and is now back into the $30’s, still a 100% gain from the IPO price. The company was formed when Chinese media company Sohu.com (SOHU) spun off its gaming unit. The majority of its revenue comes from one very popular game that has nearly 2 million users. Revenue in the first quarter rose by 50% as more Chinese flock to the online gaming arena. As disposable income increases in the emerging country, expect more growth for CYOU.
Mead Johnson Nutrition (MJN) - Priced at $24 on 2/11, MJN closed the first trading day at $26.43 and has not closed below $26 since that time. MJN is one of the global leaders in pediatric nutrition and had sales of $2.6 billion in 2007. The company is a spinoff of Bristol-Myers Squibb (BMY) and has been a stellar performer during both up and down markets. A new all-time high in early July as the market was hitting a two-month low, why? Well because even when times are tough there is one area no one will cut back - their infants. MJN in the low $30’s is a buying opportunity.
Rosetta Stone (RST) - Not a Chinese company, but it can help you learn the language of the country. Priced at $18 on 4/16, RST offers language learning software that is utilized by individuals and corporations. I am sure you have caught a RST commercial and considered learning a new language - I know I have. The stock shot up to $32 in the weeks after the IPO, but have since moved back into the $20’s where RST is an attractive buy as long as the overall market cooperates.
Bridgepoint Education (BPI) - Began trading on the NYSE on 4/15 after pricing at $10.50 per share, well below the expected range of $14 to $16. The stock quickly moved higher and traded as high as $17 in late June. The online and classroom educational provider reported strong earnings in May that saw revenue jump 116% from one year earlier. Student enrollment was up 115% and operating income surges 92%. The stock has begun to pull back in July with the market and an entry between $14 and $15 is ideal on more weakness. Online education and postsecondary campus schooling should see an increase as the unemployment rate rises and more Americans search for new careers.
There are a few more companies in the pipeline for an expected third quarter IPO date, but do not expect the same performance to continue unless the overall market cooperates.