Although all eyes have been on the searing path that benchmark equity indices have blazed in 2021, initial public offerings (IPOs) have had their own impressive bull market.
In fact, Reuters reported in mid-June that U.S. IPOs hit an annual record in less than six months. So if 2020 was the year of the novel coronavirus, 2021 could be considered the coming of age of new stocks.
Not since the mad rush of the tech bubble during the late 1990s to early 2000s have we seen such a pronounced backdrop for IPOs. Not only that, CNBC told its viewers to gird themselves for the possibility of a record-breaking rush of new stocks this fall. And while the exuberance for new public market opportunities may seem to imply a brewing bubble, for the sake of argument, there’s also a case for this ride’s sustainability.
Primarily, the new enterprises launching IPOs are not centered toward one particular segment, such as technology. Instead, you see a rich diversity of new stocks which to my knowledge has no modern precedent. In my work covering IPOs for Benzinga, I’ve seen everything from biotech plays to hair care to even car washes.
While diversity alone isn’t a reason to trust new stocks, it does suggest that economic demand is spread out across various sectors — suggesting a more stable environment for IPOs.
Secondarily, the surge of new stocks has brought additional opportunities for retail investors. True, traditional IPOs tend to bludgeon regular folks because underwriters distribute new issues at their initial offering price to institutional investors for profitability reasons. But thanks to special purpose acquisition companies (SPACs), anybody can take early bird bets; Hence Bloomberg’s labeling of SPACs as the poor man’s private equity funds.
To be fair, anytime you take a step into the unknown — which is exactly the case with IPOs — you’re absorbing substantial risk. Nevertheless, for those who want extra oomph with their speculation funds, here are new stocks with potential long-term gains.
- Rent the Runway (NASDAQ:RENT)
- GlobalFoundries (NASDAQ:GFS)
- Warby Parker (NYSE:WRBY)
- Vivid Seats (NASDAQ:SEAT)
- NerdWallet (NASDAQ:NRDS)
- Better Therapeutics (NASDAQ:BTTX)
- Lottery.com (NASDAQ:LTRY)
For full disclosure, the very existence of IPOs benefits me because I spend a quarter of my workdays covering the topic. But among the many I’ve analyzed, these new stocks appeal to me as potential long-term winners.
IPOs Set for Major Gains: Rent the Runway (RENT)
After discussing cryptocurrencies, blockchain architectures, biopharmaceuticals and integrated circuits, I jumped at the opportunity to discuss Rent the Runway. The subscription-based service allows users — mainly women — to rent thousands of designer fashions. And while I’m not very knowledgeable about fashion, Rent the Runway gave me a chance to talk about something different.
But beyond my penchant for discussing new stocks off the beaten path, RENT offers serious relevance for the modern up-and-coming consumer. For starters, the sharing economy is massive and will continue to expand as millennials and Generation Z flex their fiscal muscles. Back in 2014, the sharing economy reached a valuation of $14 billion. By 2025, experts project that it will hit $335 billion.
Furthermore, in a private message sent to me by Anya Cheng, founder and CEO of Taelor, she informed me that men are much more willing to spend money on fashion through her company’s subscription-based platform than they would left to their own devices. Taelor is similar to Rent the Runway but focuses on menswear.
If the gents are that enthusiastic about fashion, it’s a safe bet that the ladies are too, making RENT one of the IPOs to consider.
Thanks to the global supply chain disruption that has made everything from used cars to toilet paper much more expensive than they have any right being, the new normal has imposed substantial setbacks for the world economy. But no sector has experienced as much change and pressure as the semiconductor industry. And due to its extreme relevance, semiconductor firms have skyrocketed over the trailing year.
Naturally, one of the top-performing IPOs in recent weeks is GlobalFoundries, a former spinoff from Advanced Micro Devices (NASDAQ:AMD). Between its first public trading session on Oct. 28 through the close of Nov. 4, GFS stock gained more than 35%. Much of this is due to unprecedented demand for computer chips. And while this rampant demand could turn into a supply glut later, it’s all hands on deck for the semiconductor industry right now.
Nonetheless, even if a supply glut materializes, GFS is one of the most intriguing new stocks for another reason: the underlying company finds itself front and center of a hotly brewing geopolitical conflict. With China rattling its sabers over Taiwan, there’s a possibility that the U.S. can get dragged into an armed conflict due to Taiwan’s importance to global chip production.
However, GlobalFoundries is levered away from both Asian countries, giving the company critical insulation that could attract long-term investors.
IPOs Set for Major Gains: Warby Parker (WRBY)
As one of the more popular IPOs that debuted in the past few months, Warby Parker specializes in low-cost prescription glasses and sunglasses that are high in fashion-forward thinking. From that standpoint, Warby Parker features almost-perfect marketing for the core millennial demographic, who are not nearly as tied to branding as prior generations. Additionally, who doesn’t love a good deal?
One of the interesting side notes about the company is that unlike a majority of the IPOs of this year, Warby Parker direct listed its shares. A key distinguisher of a direct listing is that it involves no underwriters (or middlemen entities to basically gin up interest for the new stocks). Instead, the company sells its shares directly to would-be buyers.
To be blunt, WRBY stock is only slightly above parity from its Sep. 29 debut. However, those who have a longer-term perspective should consider adding it to their portfolio. Namely, myopia is the most common ocular disorder in the world. Furthermore, evidence indicates that global myopia cases will only increase over time.
Admittedly, such a thought process is cynical but it’s also undeniably powerful.
Vivid Seats (SEAT)
I’m going to be straightforward from the get-go regarding Vivid Seats. Among the new stocks issued in recent months, Vivid Seats is one of the most questionable enterprises due to the uncertainties of the novel coronavirus pandemic. As an independently owned and operated online ticket marketplace, SEAT stock requires society to stay on the up and up. Otherwise, a resurgence of Covid-19 cases could spell serious trouble.
Still, it’s hard not to recognize how the pandemic has also helped Vivid Seats become one of the more compelling IPOs of the new normal. As I mentioned in my interview with CGTN America’s Rachelle Akuffo, American consumers essentially suffered a one-year period where they encountered denials of basic social experiences. Thus, we have pent-up demand — commonly termed as retail revenge — with people ready to open their wallets to make up for lost time.
As evidenced by packed stadiums at baseball and football games in 2021, many Americans are ready to return to packed arenas and stadiums for sporting events and concerts. And it’s difficult to imagine that people will voluntarily go back to quarantines and social distancing — not unless we have another outbreak.
IPOs Set for Major Gains: NerdWallet (NRDS)
NerdWallet is one of the newest IPOs out there on Wall Street, debuting just this week. Therefore, I don’t have the benefit of hindsight to determine what kind of market sentiment NRDS stock commands. While that puts me in a disadvantage, I still believe that NerdWallet will be one of the better-performing stocks over the long haul. You just need to look at the broader development.
Back when the Covid-19 crisis first capsized us, the intuitive inclination was to dump out of the equities market. With what seemed like the apocalypse heading straight for us, engaging in risk-on assets seemed imprudent. But then, something strange happened….
Read More:7 New Stocks That Can Provide Long-Term Gains After Their IPOs