The “Black Death” was one of the deadliest pandemics in human history.
It killed up to 200 million people, peaking in Europe from 1347–1351. By some estimates, nearly two-thirds of Europe’s population died during the pandemic.
Certain cities were hit even harder. For example, tax records from Florence, Italy, suggest 70% of the city’s population died within a matter of months in 1348.
However, after the plague subsided, Florence emerged as the birthplace of the Renaissance during the 14th century.
Not only was it the era of art, but it’s also credited with technological innovations like the printing press, flush toilet, and magnetic compass.
As we face a modern-day pandemic – COVID-19 – we’ll see a similar renaissance in finance, science, and technology.
While the pandemic has pushed many companies into bankruptcy… others are seeing unprecedented demand for their products and services.
Today, I’ll tell you where to find them – and more importantly, how you can profit from them…
An IPO Renaissance Is Underway
Daily editor Teeka Tiwari and the team have been pinpointing companies with high growth potential before the coronavirus pandemic. But through our research, we’ve found some are doing even better amid this crisis.
And initial public offerings (IPOs) are leading the way…
An IPO is when a private company lists its stock on a public exchange. Some of the most successful ones include Amazon, Facebook, and Tesla.
Before the pandemic, Teeka forecasted a mega wave of IPOs this year. However, the space hit a lull in March, April, and May due to the fallout from the coronavirus.
There were only three listings in March, four in April, and six in May. (By comparison, in 2019, there were seven in March, 16 in April, and 26 in May.)
But IPOs were back with a bang in June, spiking to 28 listings…
Some of the most successful include Lemonade (artificial intelligence-based insurance) two weeks ago; Vroom (contact-free, online car retail) in June; and ZoomInfo Technologies (cloud-based, sales intelligence platform) in June.
Many are even deemed “essential services” by the government. And demand for their products and services has skyrocketed during this pandemic.
And now that the initial economic shock from the effects of the coronavirus has passed… an IPO Renaissance has begun.
IPO Bust-Boom Cycle
IPOs tend to suffer the most when the market crashes. Unlike blue-chip companies that have been public for decades, IPOs don’t have a long trading history. So out of fear, early investors overreact and dump their shares.
Eventually though, IPO interest bounces back as the market rebounds. As a result, the number of IPO listings goes from next to nothing to dozens.
These public companies will deliver new products and services as the country adapts to the COVID-19 era. More importantly, they should outperform the market during the recovery phase.
The team at Renaissance Capital (known on Wall Street as “The IPO Experts”) has studied past post-crisis IPO cycles.
I spoke to co-founder Kathleen Smith last week. She shared the following table with me. It shows previous market shutdowns – and how the IPO market performs afterwards – over the last two decades:
|
Cause of Shutdown |
Start of Shutdown |
Days |
IPOs in Next 3 Months |
Avg IPO Return (3-mo.) |
Avg S&P 500 Return (3-mo.) |
|
Global Growth Anxiety |
December 2015 |
47 |
16 |
24% |
6% |
|
Facebook IPO |
May 2015 |
40 |
27 |
28% |
3% |
|
Euro Debt Crisis |
August 2011 |
58 |
29 |
34% |
12% |
|
U.S. Financial Crisis |
February 2009 |
50 |
13 |
37% |
12% |
|
U.S. Financial Crisis |
November 2008 |
83 |
4 |
65% |
9% |
|
U.S. Financial Crisis |
August 2008 |
104 |
2 |
37% |
4% |
|
U.S. Financial Crisis |
March 2008 |
34 |
14 |
-6% |
-9% |
|
Dot-com Fallout |
March 2003 |
69 |
12 |
34% |
5% |
|
Dot-com Fallout |
December 2002 |
56 |
5 |
41% |
13% |
|
Dot-com Fallout |
July 2002 |
77 |
20 |
9% |
-3% |
|
September 11 |
August 2001 |
51 |
28 |
23% |
2% |
|
Average |
|
61 |
15 |
30% |
5% |
Source: Renaissance Capital
There have been 11 times where the IPO market shut down for more than a month. But as you can see, the IPO market significantly outperformed the S&P 500 every time. It beat the market by an average of 24.7% in the following three months.
And this IPO boom cycle has more room to run from here. Here’s Teeka…
I think the IPO wave this year could be as lucrative as the IPO boom of 1995–1999. For those of you who were active back then, you know as well as I do how amazing that time was.
Making money was so easy then. You’d get an IPO allocation, and sometimes, you were up triple digits by the end of the day.
Many notable private companies expect to go public in 2020 such as Stripe, DoorDash, Robinhood, and even crypto exchange Coinbase.
Right now, these new-to-market companies offer remote work tools… online entertainment… e-commerce… cloud-based services… telehealth… lifesaving drugs… and more.
If you want to build IPO exposure, consider an allocation to the Renaissance IPO ETF (IPO), the only true exchange-traded fund (ETF) for U.S.-based IPOs.
This IPO ETF holds 40-plus stocks, including popular names like Chewy, Peloton, and Zoom Video Communications. It’s up 39% in 2020, while the S&P 500 is flat.
With a renaissance hitting the IPO space, we believe this fund has more room to run.
Remember, IPOs are a high-risk/high-reward area of the markets. So you don’t need to invest much for the potential of large gains.
Regards,
Grant Wasylik
Analyst, Palm Beach Daily
P.S. With the IPO boom set to resume again, it’s essential to have an allocation to this space. But the truly life-changing gains come from buying private companies before they go public.
Investing in private companies before they go public could mean the difference between making 10 times your money or 100 or 1,000 times your money. That’s a truly life-changing difference.
That’s why Teeka and his team have been working their network of insiders for the past year – looking for the best private deals for 2020. And that led to his No. 1 wealth-building opportunity of the year…