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Top 5 Performing IPOs of 2019
Oct 21, 2019

My biggest mission at my premium newsletter Insider is to be your friend and guide in your journey of wealth-creation. It goes without saying that my topmost priority is to help you identify long-term wealth compounding investments. So, much of my focus is on cherry-picking the best long-term investing ideas.

But that doesn't mean we must ignore all the other opportunities that come our way.

One of the themes that I like to cover at Insider is IPOs.

Why IPOs, you may ask? Do IPOs really help in achieving long-term financial goals?

I think we must not look at any opportunity - small or big - through a very narrow lens.

Here's why I believe keeping a tab on the IPO market is vital to your overall investing goals:

  1. IPOs for Spotting Good Stocks Early On

    I believe IPOs offer the opportunity to spot quality companies early on. Think about any stock that has gone on to multiply investor wealth by a huge factor. How would it have been had you spotted that opportunity when the company went public with its IPO?

  2. IPOs Are Reliable Market Barometers

    Why does a company launch an IPO? It is either because it seeks to raise capital from the market, or existing investors want to exit or sell a portion of their stake. Like any seller, the promoters or other shareholders selling their stake would want the highest possible price for their shares. And the best time to do that is during a bull market, when markets are brimming with optimism and liquidity.

    This is the reason we either see few or no IPOs during bearish market conditions. When there is pessimism in the market and liquidity is dry, the selling shareholders may not only have to compromise with a lower price tag, but sometimes even run the risk of the IPO not getting fully subscribed.

  3. IPOs for Listing Gains

    At my very core, I'm all for long-term value investing. But I think your core investing philosophy shouldn't stop you from picking low-hanging fruits for some quick short-term gains. When there is substantial demand for a certain IPO, it increases the chances of some quick listing gains. With just a small investment and no effort, the potential for quick gains is not worth ignoring.

How Has 2019 Been for IPO Investors So Far?

The year 2019 hasn't seen much activity in the IPO market. Since the start of the year, there have been just 13 IPOs on the BSE main board.

Even the ones that hit the primary markets were mostly small to mid-sized IPOs. And no mega IPOs.

As I explained earlier, very few companies come out with IPOs during bearish market conditions. So, when the IPO market is sluggish, you must take that as an indicator of market sentiment and liquidity conditions.

It is interesting to note that despite the tepid market conditions, most of the companies gave positive listing day gains.

In fact, if you had invested in each one of them and held them till now, your gains would have been even better.

The chart of the day shows the top five performing IPOs of 2019.

As you can see in the chart, the best IPOs of 2019 have delivered fantastic returns. In fact, 10 of the 13 companies have delivered positive returns.

So, unlike bull markets wherein selling shareholders do their best to squeeze the highest price, bear markets often offer fantastic opportunities to spot great companies and get onboard early on.

Data Source: BSE India
*Gains as on 18 October 2019

This Chart Of The Day was published in The 5 Minute WrapUp - Rahul Shah Disagrees with My View on IRCTC

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