Investing

Top 2013 IPOs to See Major Volume Around Russell 2000 Index Change

This year was a banner one for initial public offerings (IPOs). Now many of those top names will be added to the Russell 2000 on December 20, 2013. What this means for investors is that there could be a spike in the shares as index funds add them.

Some 55 stocks that were IPOs this year will be added to the Russell 2000. The fact that the IPO market has sprung back to life is no surprise to many on Wall Street. Following the market collapse in 2008, the equity capital markets all but froze up. Many companies that had been right on the verge of going public had to put their plans on hold. Also, many of the top private equity firms had deals in the pipeline and were forced to cancel them.

Jefferies put out a very complete list of the stocks slated to go in to the index on Friday. We went through the list looking for the high-profile names that are slated for inclusion. Combining this event with the S&P 500 rebalancing, which is also slated for Friday, may generate one of the highest volume trading days of 2013.

Here are some of the top IPOs of 2013 that are ready to join the Russell 2000 on Friday.

Twitter Inc. (NYSE: TWTR) was by far and away the highest profile deal this year. After a huge lift on the first day of trading, the stock traded down, briefly under the $40 level, and has now roared back. The social media giant has drawn mixed reviews from Wall Street analysts, but it is here to stay. The Thomson/First Call price target for the stock is $40. Shares closed Tuesday way above that level at $56.45.

FireEye Inc. (NASDAQ: FEYE) was a top new IPO this past summer and has maintained the early momentum. The good thing for investors is the stock has backed up off the highs and is providing a much better entry point. The company provides various real-time protection products to enterprises and governments. It provides malware protection system (MPS) products, including software-based appliances, such as Web MPS appliances that are deployed inline at enterprise Internet access points to analyze all Web traffic. The consensus price target for the stock is posted at $49. FireEye closed Tuesday at38.87.

Barracuda Networks Inc. (NYSE: CUDA) was another tech deal that worked out well. The stock caught an upgrade to Buy two weeks ago from tech boutique shop Pacific Crest Securities. We profiled the stock in early December as a top name to own in 2014. The consensus price target for the stocks is $26.50. Barracuda closed Tuesday at $25.83.

Potbelly Corp. (NASDAQ: PBPB) was a top restaurant offering in 2013. The company came to the market in October of this year, and the company has become a hot topic of discussion in the quick-service restaurant industry. The stock soared in its first day of trading, which made those who participated in the IPO very happy and allowed the company to raise a large amount of capital. The consensus price target for the stock is $33.50. Potbelly closed Tuesday at $25.35.

Surgical Care Affiliates Inc. (NASDAQ: SCAI) was a top health care IPO in 2013 and has moved steadily higher since the deal. The company has benefited and likely will continue to benefit from the current trend towards cost cutting in medical practices. The firm’s ambulatory surgery centers are a much less costly alternative to in-house surgery departments for many medical organizations. The consensus price target for the stock is currently at $34. Surgical Care closed near that Tuesday at $33.94

Rocket Fuel Inc. (NASDAQ: FUEL) was another red-hot IPO in 2013. The company is a technology one that provides artificial-intelligence digital advertising solutions. The company offers artificial intelligence-driven solutions built on its real-time optimization engine, which leverages Big Data and its computational infrastructure to deliver highly automated, measurable digital advertising campaigns. This is a sector of advertising where money is pouring in. The consensus price target for the stock is posted at $63. Rocket Fuel closed Tuesday at $51.28.

Apparel Holding Corp. (NYSE: VNCE) was a top IPO in the apparel manufacturing space. The company provides fashion apparel and accessories under the Vince brand name through wholesale distribution to department stores and specialty stores, as well as direct-to-consumer through its retail stores and the Vince.com website, as well as recreational apparel and products under the Kelty, Sierra Designs, Ultimate Direction, Slumberjack, Wenzel and Isis brand names through wholesale distribution to retailers and through websites. The consensus price target for the stock has not been posted yet. Apparel Holding closed Tuesday at $30.80

Container Store Group Inc. (NYSE: TCS) was one of the hottest retail stocks to go public in 2013. One of the featured products at every Container Store is the Elfa series of highly customizable shelving units. The Swedish manufacturer makes flexible organization systems for closets, garages and other applications. While Elfa’s products provide remarkable functionality and value to consumers, the important thing for investors to note is that Elfa has been a wholly owned subsidiary of the Container Store for the past 14 years. This gives the customer the ability to create and install customized storage solutions that can be designed and installed by the customer or with the assistance of designers and/or professional installers. The consensus price target for the stock is $43. Shares closed close to that on Tuesday at $42.40.

As we head to 2014, the IPO calendar will slow down here in the latter stages of December. With most of the major firms we cover expecting a solid, but not spectacular year for 2014, the flow of new deals should continue to be strong. Years of pent-up demand have created a pipeline that may not be back to normal until 2015. Investors that do not have the ability to get an IPO stock can always look for a “backdraft” trade. That means watching the top names that trade down or flat after a big rise and buying the stock then. The Twitter and Facebook deals prove that it can be a worthy strategy.

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