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The IPOX® Week, December 31, 2016

  • In 2016, IPOX 100 U.S. ties Nasdaq 100. European IPOs record strong back-to-back gains vs. markets.
  • Select IPOX-linked investment products rise strongly.
  • Big year seen for IPOs and Spin-offs.

In 2016, IPOX 100 U.S. ties Nasdaq 100. European IPOs record strong back-to-back gains vs. markets. The IPOX Indexes ended the year mixed with the IPOX Global (IPGL50, IPGL30) lagging, while the IPOX Regional Indexes generally traded ahead of the markets. Most upside focus for the year was on the IPOX U.S. Indexes (IPXC, IPXO, IPXT), with the diversified IPOX 100 U.S. (IPXO) gaining +5.89%, exactly in line with U.S. Technology (Nasdaq 100), but lagging the S&P 500 (SPX) and U.S. small-caps (Russell 2000), which soared on indiscriminate asset allocation-driven index fund buying during the final quarter of the year to mitigate some of the large relative losses suffered over the previous years. Despite the uncertainties over the course of the European union ahead of Brexit and elections, we note continued relative strength in the IPOX Europe (IXTE) which provided for market-beating returns for a second year in a row. This extended to the IPOX Nordic (IPND), capturing the performance of IPOs and Spin-offs in Europe’s most innovative and dynamic economic sub-region. IPOs focused on the Asia-Pacific region lagged, impacted by the poor performance of China-linked heavyweights, as well as government privatizations.

IPOX Returns (%) (P) Week 2016 2015
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) -0.39 -2.50 0.98
IPOX Global 30 (IPGL30) -0.40 1.73 -0.96
IPOX Intern. (IPXI)* 0.44 -4.63 -5.85
Exposure: United States
IPOX Composite U.S. (IPXC)* -0.51 7.24 -3.90
IPOX 100 U.S. (IPXO)* -0.76 5.89 1.57
IPOX 30 U.S. (IPXT) -0.72 8.44 4.91
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) -0.26 0.18 -14.41
IPOX Nordic (IPND) 0.80 -1.59 23.88
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) 0.29 -1.96 -2.32
IPOX China C. (IPXUCHCHP)* 1.85 -3.73 -14.45
IPOX China (CNI) 2.24 -10.21 -9.10

* Basis for Exchange-Traded Products (e.g. FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT) and CME Futures (e-mini IPOX 100 U.S. Index Futures [IPOH7]).

Select IPOX-linked investment products rise strongly. Ahead of what is anticipated to be a big year for IPOs, select IPOX-linked investment products rose strongly. For example, the semi-passive USD million 615, 5-star, 10-year old First Trust U.S. Equity Opportunities ETF (ticker: FPX) added +6.72% in 2016, while the London-listed/traded version of fund denominated in British Pounds (ticker: FPX LN) gained +28.31%, respectively. We also note market-beating returns of active IPOX-linked funds during 2016 with the Catalyst IPOX Allocation Fund (ticker: OIPAX) adding +15.69% in 2016. The mutual fund available to U.S. investors adds an active strategy provided by IPOX to a core position in the IPOX 100 U.S. Index.

Individual stocks in focus last week: Recently added stocks continued to rank amongst the best and worst performing holdings in the IPOX Indexes. In the IPOX 100 U.S. Index, for example, strong gains in recent Spin-offs Chicago, IL-based packaged food maker Lamb Weston Holdings (LW US: +4.18%) and auto-parts maker Adient (ADNT US: +2.81%) were partially offset by weakness in cloud platform provider Nutanix (NTNX US: -8.26%) which ranked amongst the worst performing IPOX 100 U.S. Index holdings on the week. With beleaguered drug makers heavyweights Shire (SPPH US: +2.47%) and Abbvie (ABBV US: +1.56%) trading well towards the end of the year, we note the big momentum-driven gains in takeover candidates banking group First Republic Bank (FRC US: +1.03%), as well as 05/2016 IPO food services provider P/E-backed consumer staple US Foods Holding (USFD US: +2.00%), one of 2016’s largest IPO of a U.S. domiciled firm. Both firms closed the year at fresh post-IPO highs. Abroad, amid renewed weakness in the slew of 2015 Japanese privatization offerings, we note big gains in all recently listed New Zealand-traded energy firms, including Z Energy (ZEL NZ: +3.27%), Genesis Energy (GNE NZ US: +3.19% and Meridian Energy (MEL NZ: +2.77%), while previously highlighted here, China-domiciled, HK-traded educational services provider Virscend Education (1565 HK: +19.48%) continued to ascend in heavy volume to close the year at a fresh post-IPO high. A similar momentum extends to French engineering services provider SPIE (SPIE FP: +10.25%), an IPOX Europe (IXTE) holding.

Big year seen for IPOs and Spin-offs. No significant notable accessible (non-China A shares) deals commenced trading last week and are expected for the upcoming week. With a large number of small- and mid-cap IPOs seen across industries with energy IPOs making a notable come-back, the most media-heavy global deal expected during Q1/Q2 involves the IPO of U.S.-domiciled social networker Snap.

Josef Schuster is the founder of IPOX Schuster LLC (www.ipoxschuster.com), a Chicago-based Financial Services company specialized in Financial Products Design related to Initial Public Offerings and corporate Spin-offs. He is the chief architect of the IPOX Indexes, a global index group initiated in 2004 that encompasses an index technology allowing for asset-allocation focused exposure to the “going public” effect associated with global IPOs and Spin-offs. Mr. Schuster earned his Bachelor of Arts degree in Business Administration in 1994 from the European Business School, London. Mr. Schuster was also awarded a MSc in Accounting and Finance in August 1996 and a MPhil / PhD in Accounting and Finance in June 2003 from the London School of Economics.

ABOUT THE IPOX INDEXES: Through the range of the IPOX Indexes, market participants have an innovative opportunity to navigate the global IPO and Spin-off market and to track the performance of this economically significant sector more accurately and comprehensively than with any other index group. The IPOX Indexes accomplish the systematic indexation of the aftermarket performance of the IPO and Spin-off sector, while – at the same time – preserving the benefits of diversification. Linked to the IPOX 100 U.S. Index, for example, IPOX-linked investment products available to investors include the pioneering USD million 600, 5-star First Trust U.S. IPO ETF (ticker: FPX). On February 18, 2016, CME Group, the world’s largest exchange operator, launched e-mini IPOX 100 U.S. Index Futures, offering market participants for the first time a tool to manage the aggregate risk associated with U.S. IPOs and Spin-offs.

Disclosure: the author has no position in the stocks mentioned.

This article is provided for educational purposes only and is not considered to be a recommendation or endorsement of any trading strategy. The author is not affiliated with Lightspeed Trading and the content and perspective is solely attributed to the author.

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