One of the signs of a healthy market is the number and the overall quality of new companies going public. This is how investors get a wider array of choices, as well as a chance to learn more about new ideas.
It's also how we, as investors, get an opportunity to get in on the ground floor. (Or as close to the ground floor as possible.) Indeed, the more choice we have, the better.
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This is why I like to watch how initial public offering (IPO) activity is shaping up. My interest in the IPO market isn't purely academic. It's not because I love data (although I do love it -- information is one powerful ally in the art of investing). But there is more to analyzing IPO trends than just comparing old statistical -- and, in most cases, backward-looking -- information.
These are the ultimate forward-looking markets.
I believe new IPO information reveals the underlying dynamics of this exciting subset of the market. Plus, IPO market activity gives us invaluable insight into the overall market status, informing our expectations for the future.
Currently, the trends are improving. I'm optimistic about the future supply of fresh blood in the public market this year and, possibly, next.
Starting in July 2017, the JOBS Act approach has been broadened. As part of an effort to make public markets more attractive to companies of all sizes (and at earlier stages of their developments), the SEC has opened the JOBS process to companies currently not qualified as "emerging growth."
The net result of this measure is that the entire IPO process has now shortened significantly.
According to Bloomberg, since 2015, the average number of days between a company's IPO and its first day of trading has been cut by 80%.
This new ease of filing, plus the ability to file confidentially, resulted in a significant improvement in the sheer number of deals last year. According to ClearBridge Investments, there were 160 new deals in the IPO market in 2017 -- 50% more than in 2016. All this activity was led by biotechs, technology and Chinese companies -- just what the doctor ordered in terms of widening the scope of new companies available as our candidates for my premium newsletter, Game-Changing Stocks.
Of course, the quality of these newly minted public companies can widely differ. But the added heft that comes with going public is generally good for many of them.
And while not every IPO will carry a game-changing promise, with the number of IPOs growing, investors' chances at finding such a company are growing, too. And now, one of the most interesting tech IPOs of 2017 will join our Game-Changing Stocks portfolio.
A Major New Player In The API Economy
Cloud-based communications specialist Twilio (NYSE: TWLO) has long been one of the more controversial holdings in my Game-Changing Stocks portfolio.
I have long thought that TWLO's unique business positioned the stock to outperform, while skeptics have been expecting the company's business proposition to not pan out. I'm glad that the optimists are winning: The stock is up more than 60% year to date and more than 27% since April 2017.
One reason I like TWLO is that the company's business is centered around a proprietary application programming interface (API) that is used by more than a million software developers to automate phone calls and mobile messages.
API-centered businesses carry a strong promise in today's interconnected and increasingly complicated technology environment. So strong is this promise that a new term -- "API economy" -- has been coined. Tech companies small and large -- from Amazon (Nasdaq: AMZN) to Google (Nasdaq: GOOG) to Facebook (Nasdaq: FB) to Twilio (NYSE: TWLO) to Uber -- all use API-based computer architecture. And because of the growth of mobile and the cloud, APIs are poised to become the go-to tool for sharing data across multiple networks and applications.
This month's game-changing pick is a relative newcomer to this market -- it was founded in 2006 and went public last March. However, the company has already found success, with over 12,000 customers in a variety of sectors. Its customers include heavy-hitters like Netflix, Boeing, Target, McDonald's, and Mastercard, to name a few.
And the best part is, the young company still has so much growth left. Sure, it may not achieve the 57% growth it saw last year again, but the company is poised to deliver 20% annual profit growth for the next several years. On its fourth-quarter earnings call, the company announced a goal to reach $1 billion in total revenue in 2021.
This is one of the largest opportunities in technology today, and its well positioned to benefit from the expansion of its proven platform. I'm adding this pioneer to my portfolio and advising my readers to do the same.
And while it wouldn't be fair to those readers to share the name of this groundbreaking company here, you can get this pick today with a risk-free subscription to my Game-Changing Stocks newsletter.
Keep in mind, this is just one of dozens of triple-digit opportunities I've covered in my newsletter. Others have landed total returns of 296%, 304%, and 368%. Subscribers also get access to the biggest game-changer of all, one I expect to deliver a 1038% gain in just five years...
If you'd like to learn about my latest research and get a special offer to try Game-Changing Stocks, go here.