US IPO Index Kicks Off 2012 With A Bang

by: Renaissance Capital IPO Research

The FTSE Renaissance US IPO Index (IPOS) has started the year off on a positive note, generating a 9.0% return so far in January and strongly outperforming both the S&P 500 (4.6%) and the Russell 3000 (4.9%). While the index produced lackluster results in 2011, it is currently demonstrating the powerful rebound potential that has historically been seen after down periods.

Three weeks into the year, index outperformance has been led by three sectors: Consumer Goods, Technology and Consumer Services. The Consumer Goods sector, which currently includes 11 companies with an aggregate index weight of 16.9%, has contributed 2.8% to index performance so far this year thanks to the strong rebound of index heavyweight General Motors (NYSE:GM), which generated a 23.3% price return on a 45.0% loss in 2011.

The Technology sector, which currently includes 37 constituents with a combined weight of 14.2%, has contributed 1.6% to overall index returns thanks to the strong performance of several companies. After recording a 26.6% loss in 2011, diversified global semiconductor company NXP Semiconductors (NASDAQ:NXPI) gained 33.6% in the first three weeks of 2012. Business intelligence software vendor Qlik Technologies (NASDAQ:QLIK) contributed 0.2% thanks to a 9.5% year-to-date return and its sizeable weight in the index of 1.7%. The double-digit returns posted by Freescale Semiconductor (NYSE:FSL), Fusion-io (NYSE:FIO), Calix (NYSE:CALX), Convio (NASDAQ:CNVO) and HiSoft Technology (HSFT) further contributed to the sector's strong performance so far in 2012.

Consumer Services, the index's most heavily weighted industry at 18.5%, contributed 1.2% to index performance during the first three weeks of the year. The industry greatly benefited from the rebound of various Chinese ADRs, including China's leading internet video portal (NYSE:YOKU) (+33.8%), real estate website operator SouFun Holdings (NYSE:SFUN) (+33.5%), and Chinese social network operator Renren (+20.8%) (NYSE:RENN).

While the index is up overall, 46 out of the 181 constituents have traded down since the end of 2011. Camelot Information Systems' shares, for example, continued to tumble (-17.9% year-to-date) in light of the ongoing investigation for securities fraud. Other poor contributors thus far in 2012 include consumer research company Nielsen Holdings (NYSE:NLSN) (down 5.4%) and high-performance electric vehicle manufacturer Tesla Motors (NASDAQ:TSLA) (down 6.9%), which contributed -0.2% and -0.1% to overall returns, respectively. Although it is still early in the year, the positive bounce of the US IPO Index reflects the resilience of the IPO market, and with a pipeline full of notable companies, including Facebook, Living Social, and the Carlyle Group, 2012 could prove to be a very strong year for the index.

(All returns are as of market close on Friday, January 20, 2012. Unless otherwise indicated, all returns are year-to-date.)