My Favorite IPOs of 2013
Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
About a year ago, a friend told me about a relatively unknown industry, 3-D printers. As an artist, his fascination was that these products could potentially be used to build an entire house. Little did I know at the time that the sector would become one of the best investments over the following 12 months, including a company that commenced its initial public offering in February of this year, ExOne (NASDAQ: XONE).
As a stock researcher, I am not usually a watcher of initial public offerings. Their valuations are hard to determine, as many are still in the startup phase. That said, correctly timed investments in new issues can be lucrative. I would like to share the IPOs that I have been most interested in so far in 2013, starting with the aforementioned ExOne.
The latest 3-D printing stock
Shares of ExOne were priced at $18 on Feb. 15. A total of more than 6.3 million shares was offered, netting more than $101 million. About 5.3 million shares were issued, netting a total of $95 million. Since that time, the company's value has skyrocketed to around $670 million. After all, this is a firm residing in the same industry as 3D Systems and Stratasys, two others that have gained the attention of investors during the past couple of years.
The two previously existing industry players are already solidly profitable. Although ExOne is yet to post positive earnings, it is well on its way to turning a profit. For instance, 3D Systems, since its initial stock issuance about two years ago, has improved its bottom-line performance considerably.
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To meet its goal of gaining a global customer base through the development of new printer capabilities and expansion to additional product markets, management intends to construct production service centers. Currently it operates centers in the U.S., Germany, and Japan. Priorities include increasing the number of materials that may be utilized, as well as the job sizes. Investors willing to endure near-term volatility could still benefit in the long haul, even at the inflated valuation.
Looking to improve money-transfer technologies
A second company that debuted in February was Xoom (NASDAQ: XOOM), priced at $16 a share. The company sold 6.3 million shares, raising roughly $101 million. The stock jumped to $26 after the first day, but was recently trading at $20.56.
XOOM is a provider of money-transfer services, with an expanding customer base. It is available through walmart.com and is aiming to perfect its mobile offering. The company posted breakeven ($0.00 a share) results in the March period.
XOOM, like many newly-minted public companies, has been active in the secondary market, and its share count was recently around 30 million, a factor limiting early share price gains.
The company may be included in the same conversation as other payment service providers, such as EBay's Paypal, Intuit, Fiserv, and Global Payments; stocks I reviewed in a February blog.
XOOM may be more of a long-term bet while it expands and improves operations. Along with its mobile offering, XOOM is spending on product enhancements, including a way for customers to track their transfers electronically, and a "pay only when received" initiative. I believe investments in operations will drive profitability gains and allow for share-price upside over the long run.
Fairway Group, aiming to benefit from the healthy and organic food trend
Changing gears, the April IPO of supermarket chain Fairway Group (NASDAQ: FWM), at 13.7 million shares for $177.5 million, was just prior to the run-up of the stocks of fellow industry firms such as Whole Foods and The Fresh Market.
The New York-based Fairway operated 12 locations at the end of March, offering primarily fresh, natural, and organic foods. Several of these include wine and spirits stores.
Supermarkets are typically low-risk investments that provide shareholder value by way of dividends. Those that offer lines of healthy edible offerings have been investor favorites for some time now. Fairway may find its niche within this subsector.
Fairway shares, recently trading at $23.91, up from the IPO price of $13, could be a good holding for those willing to endure near-term volatility. It may provide long-term investment value as a supermarket with expanding operations. In fact, it may eventually grow its store base to as many as 300, including 90 in the Northeast region (New England to D.C.). While it expands, Fairway will aim to capitalize on consumer trends such as healthy eating, while also targeting operating margin improvements through infrastructure investments, including the construction of a central production facility.
Damon Churchwell owns shares of The ExOne Company and XOOM. The Motley Fool recommends The ExOne Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!