Whether by IPO or direct listing, companies making their public debut this year have been on fire.
Some of those hot names include Roblox, Bumble and South Korean e-commerce company Coupang, all of which have soared since they went public in the past few weeks. Gaming platform Roblox, for example, is up 60% from last week’s direct listing.
Mark Tepper, president of Strategic Wealth Partners, is steering clear of these newer stocks until they’ve proven their worth.
“Unless you’re getting it at the IPO price, which isn’t the case for almost all retail investors, I kind of think it makes more sense to take a wait-and-see approach. My general rule here is to avoid these companies for at least the first six months or so, kind of let the dust settle,” Tepper told CNBC’s “Trading Nation” on Monday.
There are some “diamonds in the rough,” though, he said – Tepper prefers a stock like Vroom to a Roblox or Bumble, a name he said meets his growth-at-a-reasonable price philosophy.
“I do think that Vroom is priced pretty reasonably. It’s the No. 2, pure-play e-commerce auto play behind Carvana but it trades at an 80% discount with faster growth,” he said.
Tepper added that Vroom is also overcoming early inventory issues that depressed the stock early in its run. The company went public in June 2020. Since a September peak, it has fallen 50%.
While Bumble and Roblox may have risen post-debut, the rest of the IPO and direct listing market looks to have cooled off, according to Oppenheimer’s head of technical analysis, Ari Wald.
“What was a very red-hot IPO market really is much less so. It’s not as red hot as it was, I think, as represented by this Renaissance IPO ETF. [It] was down 25% from its peak into its recent low and it’s still off 14% from its high,” Wald said during the same interview.
The ETF’s hold above its 200-day moving average suggests to Wald that it is still in an uptrend, though. One stock within the ETF, Peloton, looks attractive to him.
“The stock is about a third of its price that it was trading at around Christmas time when it peaked. Through this pullback, it held its November low, and what we’re looking for it now to do is start to build this base at its 200-day average, that’s marking the start of support at around $102,” said Wald.
Peloton is down 34% from its mid-January high. However, it has surged more than 530% since it bottomed in March 2020.
Disclosure: Strategic Wealth Partners holds VRM.
