2014 was one of the hottest periods for initial public offerings (IPO) since the market’s crash during the Global Financial Crisis, but 2015 could prove to be a different story.
With low interest rates, a falling Australian dollar and the market’s confidence riding high, data released by accounting firm Deloitte shows that a massive $26 billion of equity was listed on the ASX during the year.
The returns were nothing short of incredible, either. The average 2014 year-end IPO returned 17%, significantly outperforming the benchmark S&P/ASX 200’s (Index: ^AXJO) (ASX: XJO) measly 1% return.
Is it sustainable?
To quote Deloitte’s Surf’s up: 2015 IPO report, “The ASX has gone from strength to strength, closing at a seven year high in February 2015, driven by low rates and further expected cuts. This is expected to continue to drive investor demand for new listing for the next 12 months.”
It would seem that conditions for floats in 2015 are similar to last year’s. Interest rates and the Australian dollar have both fallen further and recently listed companies continue to outperform, positively influencing the market’s appetite for IPOs. In the first two months of 2015, seven companies floated their shares and have risen an average 22.8% in the time since.
Deloitte highlighted companies such as Appen Ltd (ASX: APX), Phytotech Medical Ltd (ASX: PYL) and Martin Aircraft Company Ltd (ASX: MJP) as three of the strongest performers from the bunch, indicating the window for IPOs remains open.
In saying that however, it may be difficult to top the quality of the companies that listed in 2014 which included Medibank Private Ltd (ASX: MPL), Healthscope Ltd (ASX: HSO), Regis Healthcare Ltd (ASX: REG) and Genworth Mortgage Insurance Australia (ASX: GMA). While accounting software provider MYOB and sportswear brand 2XU are both shaping up as candidates to float their shares this year, there will be less high-profile IPOs which could cool the market somewhat.
While investors can find great deals in the IPO market, sometimes the greatest opportunities already exist within the market. The Motley Fool’s top analyst, Scott Phillips, has recently named one stock he believes is a fantastic buy right now for 2015 and beyond.
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Scott and his team have published a detailed report on this tiny ASX stock. Find out how you can access our TOP healthcare stock today!
As of 2.11.2020
Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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