IPO Watch 2019: Which Stocks are Worth Buying?

TL;DR

Investing in IPOs requires careful consideration of the company's long-term potential, profitability, and market trends.

Transcript

Shannon Jones: Hello, and welcome to Fool global headquarters here in Alexandria, Virginia! I'll be your host for today's discussion, Shannon Jones, and I am joined here by lead advisor Abi Malin and Motley Fool co-founder and CEO, Tom Gardner, and a very creepy, weird, head with a jester cap on it as well. But welcome to all of you! Tom Gardner: I... Read More

Key Insights

• 🍉 The Motley Fool is starting to pay more attention to IPOs but emphasizes the importance of focusing on quality companies for long-term investments.
• 🙃 The majority of IPOs underperform the market, but there are outliers with significant upside potential.
• 🧑‍🏭 Factors such as the total addressable market, profitability, and growth opportunities are crucial when evaluating IPOs.

Questions & Answers

Q: Why has The Motley Fool traditionally avoided investing in IPOs?

The majority of IPOs underperform the market, and many investors have a short-term investment mindset, looking for quick profits rather than long-term growth.

Q: What are the key factors to consider when evaluating an IPO for investing?

It is important to assess the company's long-term potential, profitability, and market trends. Additionally, consider the total addressable market and the company's growth opportunities.

Q: Should profitability concerns deter investors from investing in IPOs?

Profitability is an essential factor to consider, as companies that are profitable at the time of IPO tend to outperform those that are not. However, it is also crucial to evaluate the company's path to profitability.

Q: When should investors consider adding to their holdings of a winning IPO stock?

Investors should consider adding to a winning IPO stock if they believe in the business more than before and if the company's sales growth rate is high or accelerating.

Summary & Key Takeaways

• The Motley Fool historically stayed away from IPOs due to the high number of underperforming companies and short-term investment mindset associated with them.

• However, IPOs represent fresh business opportunities that can change the world, and The Motley Fool is becoming more involved in IPO investing.

• Research shows that while the majority of IPOs underperform the market, there are a few standout companies that outperform, making it essential to focus on quality companies.