As Valentine's Day is upon us, there is plenty of happiness going around the IPO market this February.
The FTSE Renaissance US IPO Index (IPOS) has extended its January rally into February, and is now up 14.3% for the year, significantly outperforming both the S&P 500 (+7.5%) and the Russell 3000 (+8.5%). While the index produced lackluster results in 2011, it is currently demonstrating the powerful rebound potential that has historically been seen after down periods.
Two weeks into February, index outperformance this month (+3.8% vs. 3.0% for the S&P 500 and 3.4% for the Russell 3000) has been led by three sectors: Consumer Goods, Technology, and Industrials. The Consumer Goods sector, which currently includes 11 companies with an aggregate index weight of 16.9%, has contributed 1.2% to index performance month-to-date thanks to the continuing rebound of index heavyweight General Motors (GM), which has generated a 5.0% price return in February. Other solid performers in the Consumer Goods sector over the past two weeks include three-dimensional display technology company RealD ((RLD); +42.5%) and global luxury lifestyle brand Michael Kors Holdings ((KORS); +8.6%). Consumer Goods have been the index's strongest sector in 2012 and have contributed 3.8% to overall index returns year-to-date.
The Technology sector, which currently includes 37 constituents with a combined weight of 15.3%, has contributed 0.8% to overall index returns in February thanks to the strong performance of several companies. After failing to impress in its IPO, leading social game developer Zynga (ZNGA) has gained 27.9% so far this month, specifically since Facebook's (FB) IPO registration with the SEC. Business intelligence software vendor Qlik Technologies (QLIK) contributed 0.1% thanks to a 7.6% price return and its sizeable weight in the index of 1.8%. The double-digit price returns posted by Calix (CALX), Broadsoft (BSFT), and Jive Software (JIVE) further contributed to the sector's strong performance so far this month. Technology has been the second strongest sector in the index this year, contributing 2.9% to overall index performance since December.
Made up of 24 companies with a combined aggregate index weight of 11.2%, Industrials are having a strong February. So far this month, companies in this sector have contributed 0.7% to overall index performance, led by online professional network LinkedIn (LNKD), which has jumped 22.0% after reporting strong earnings for the second consecutive quarter. Electronic equipment company Sensata Technologies (ST) has also been a strong contributor in February, generating a 9.9% price return. Other strong industrials companies include Roadrunner Transportation Systems (OTCPK:RRTS), Fabrinet (FN), and Thermon Group Holdings (THR). Industrials have contributed 1.8% to overall index performance year-to-date.
However, not all sectors in the index are flourishing in February. The Basic Materials sector, comprised of 10 companies with an aggregate index weight of 3.5%, has negatively impacted index performance in February, detracting 0.5% from index performance. Leading underperformance in this sector with an index weight of 1.2% was rare earth oxide producer Molycorp (MCP), which has traded down 14.8% since the end of January. Other Basic Materials companies that detracted from index performance were Codexis (CDXS), CVR Partners (UAN), and Oxford Resource Partners (OXF).
The US IPO Index is off to a roaring start this year, and with an IPO pipeline packed with promising companies, including The Carlyle Group, Toys"R"Us, and Facebook, the index's best months may be still to come in 2012. Be sure to check the Renaissance Capital US IPO calendar for further listing developments as they arise.
(All returns are as of market close on Monday, February 13, 2012.)
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