In this article, we will take a look at the 13 best IPO stocks to buy heading into 2024. To skip our analysis of the recent market trends and market activity, you can go directly to see the 5 Best IPO Stocks to Buy Heading into 2024.
The global equity markets had one of their worst years in terms of initial public offerings (IPOs) in 2022. The markets are poised to repeat the same feat this year with year-to-date figures not showing much improvement. The global IPO market hit a peak in 2021 as a combined total of 2,436 IPOs during the year to raise gross proceeds of nearly $460 billion, according to an EY report. The very next year, IPO activity came crashing down as capital became expensive with rising interest rates and inflation. Last year, only $184 billion of gross proceeds were raised in 1,415 transactions.
During the first three quarters of 2023, global IPO volumes declined by a further 5% to 968 IPOs globally while gross proceeds, at $101 billion, plummeted 32% lower on a year-over-year basis. During the nine month period, emerging markets accounted for 77% of the global share by number and 75% by proceeds, according to the report.
Analysts and market participants are expecting a recovery in the IPO markets in 2024 with moderate deal volumes in the early half of the year followed by a stronger recovery in the second half of the year once interest rate cuts kick in. “The IPO markets will be much better in 2024 than they were this year, and my gut tells me that both volumes and breadth of access will progress as we move through the year,” said David Ludwig, global head of equity capital markets (ECM) at Goldman Sachs.
The S&P U.S. IPO & Spinoff Index, which measures the performance of companies that have had IPOs or have spun off from a parent company within the last five years and have a market cap of at least $1 billion. The index was at its highest level during the last decade in July 2021. This was followed by rapid decline once the Fed started raising interest rates. Following a turbulent performance in 2023 that took the index as low as 45% below 2021 highs, the index has been on the rise since October end and has recovered some of its losses. As of December 22, the index was up 29.74% year-to-date and 27% below the 2021 high mark.
Our list of 13 best IPO stocks to buy heading into 2024 has also considered other factors of the selected stocks that can suggest positive prospects for these stocks in the future. These stocks have strong fundamentals as well as benefit from positive analyst and hedge fund sentiments. The list is heavily dominated by companies from the consumer cyclicals sector, including internet retail companies as well as household products providers. Notable names on the list include Mobileye NV (NYSE:MBLY), GE Healthcare Technologies, Inc. (NASDAQ:GEHC), and Kenvue, Inc. (NYSE:KVUE), among others.
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Methodology
We shortlisted stocks that started trading on the stock markets in the United States during the last 24 months. We only retained stocks with positive analyst ratings, strong fundamentals, positive average analyst price targets, and positive sales growth for the last 5 years. The remaining stocks were ranked based on Insider Monkey’s database of elite hedge funds, tracked as of the third quarter of 2023. The top 13 stocks based on hedge fund sentiment, ranked in the ascending order of hedge fund shareholders, have made onto our list of 13 best IPO stocks to buy heading into 2024.
Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
13. Nextracker Inc. (NASDAQ:NXT)
Number of Hedge Fund Holders: 26
Fremont, California-based Nextracker Inc. (NASDAQ:NXT) is a leading provider of intelligent solar tracker and software solutions used in utility-scale and distributed generation solar projects around the world. The IPO of the company was completed on February 9, 2023, by its parent company, global electronics manufacturing services provider Flex Ltd. (NASDAQ:FLEX).
On October 25, Nextracker Inc. (NASDAQ:NXT) announced that its parent company, Flex Ltd. (NASDAQ:FLEX), with ownership of 51.45% stake in the company, intends to spin-off all of its remaining interests in the company to the shareholders of Flex Ltd. (NASDAQ:FLEX). The transaction is expected to close in Q1 2024.
On the same day, Nextracker Inc. (NASDAQ:NXT) released its financial results for the three months ended September 29, 2023. Its revenue went up by 23% y-o-y to $573 million, it reported a net income of $81 million and a normalized EPS of $0.65. Both top and bottom-line figures surpassed consensus estimates, by $35.5 million and $0.29 respectively.
On December 19, Piper Sandler analyst Kashy Harrison initiated coverage of Nextracker Inc. (NASDAQ:NXT) shares with an ‘Overweight’ rating and a price target of $60 which represented a potential upside of 21.83% based on the share price on December 22.
12. MasterBrand, Inc. (NYSE:MBC)
Number of Hedge Fund Holders: 26
Jasper, Indiana-based, MasterBrand, Inc. (NYSE:MBC) is the largest manufacturer of residential cabinets in North America. It offers a diversified mix of cabinets across price points, product types and channels through a distribution network of over 4,500 dealers, major retailers, and builders.
MasterBrand, Inc. (NYSE:MBC) was separated from Fortune Brands Innovations, Inc. (NYSE:FBIN) on December 15, 2022, through issuance of MasterBrand, Inc. (NYSE:MBC) shares for each share of Fortune Brands Innovations, Inc. (NYSE:FBIN) share.
On November 7, MasterBrand, Inc. (NYSE:MBC) released the financial results for Q3 2023. Its revenue decreased by 21% y-o-y to $677 million while net income increased by 14% y-o-y to $60 million. At $0.46, the normalized EPS for the quarter surpassed the consensus estimates by $0.12.
11. Fortrea Holdings Inc. (NASDAQ:FTRE)
Number of Hedge Fund Holders: 26
Fortrea Holdings Inc. (NASDAQ:FTRE) is a leading global provider of clinical development and patient access solutions to the life sciences industry. It provides phase I-IV clinical trial management, clinical pharmacology, differentiated technology-enabled trial solutions and post-approval services.
On November 13, Fortrea Holdings Inc. (NASDAQ:FTRE) released its financial results for Q3 2023. Its revenue increased by 2% y-o-y to $776 million. Its normalized EPS of $0.24 surpassed consensus estimates by $0.08.
As of Q3 2023, Fortrea Holdings Inc. (NASDAQ:FTRE) shares were owned by 26 hedge funds with the total shares held by them valued at $540 million.
Like other stocks such as Constellation Energy Corporation (NASDAQ:CEG), Klaviyo, Inc. (NYSE:KVYO), and Mobileye NV (NYSE:MBLY), Fortrea Holdings Inc. (NASDAQ:FTRE) is among the 13 best IPO stocks to buy heading into 2024.
10. PHINIA Inc. (NYSE:PHIN)
Number of Hedge Fund Holders: 27
Auburn Hills, Michigan-based PHINIA Inc. (NYSE:PHIN) is a leader in premium fuel systems, electrical systems, and aftermarket products with a strong brand portfolio that includes Delphi, Delco Remy® and Hartridge. It offers fuel systems and aftermarket parts for combustion engines of commercial vehicles, industrial applications, and passenger vehicles.
On November 6, PHINIA Inc. (NYSE:PHIN) released the financial results for the third quarter of 2023. Its net revenues increased by 4% y-o-y to $896 million, while it generated a net income of $11 million. The company also declared a quarterly cash dividend of $0.25 per share.
In its Q3 2023 investor letter, Oakmark Funds, advised by Harris Associates, made the following comments about PHINIA Inc. (NYSE:PHIN):
“Existing portfolio holding BorgWarner spun-off its fuel systems and aftermarket business into a new publicly traded company named Phinia. Phinia is a well-managed business that trades for just a mid-single-digit multiple of our estimate of normal earnings. We continue to hold shares in the company given that it trades well below our estimate of intrinsic value.”
9. SharkNinja Inc. (NYSE:SN)
Number of Hedge Fund Holders: 27
Juno Beach, Florida-based SharkNinja Inc. (NYSE:SN), is a global product design and technology company that creates lifestyle solutions through innovative products for consumers around the world. The company is known for its brands, Shark and Ninja, with products across numerous household categories, including Cleaning, Cooking, Food Preparation, and Others.
On November 9, SharkNinja Inc. (NYSE:SN) released the financial results for Q3 2023. Its revenue increased by 13% y-o-y to $1.1 billion while net income decreased by 77% y-o-y to $19 million. At $0.95, the normalized EPS for the quarter surpassed the consensus estimates by $0.14.
On November 28, Canaccord Genuity analyst Brian McNamara initiated coverage of SharkNinja Inc. (NYSE:SN) shares with a ‘Buy’ rating and a price target of $61. The target price represents a potential upside of 20.46% based on the share price on December 22. The company’s shares are up nearly 69% from its opening price when it started publicly trading.
As of Q3 2023, 27 hedge funds tracked by Insider Monkey held shares of SharkNinja Inc. (NYSE:SN). The total value of the shares held by these hedge funds was $667 million.
8. Knife River Corp. (NYSE:KNF)
Number of Hedge Fund Holders: 29
Knife River Corp. (NYSE:KNF) is a leading construction materials company with operations in 14 states across the United States. It mines aggregates and markets crushed stone, sand, gravel and related construction materials, including ready-mix concrete, asphalt and other value-added products.
On November 7, Knife River Corp. (NYSE:KNF) announced the pricing of a secondary public offering of 5.1 million of its common shares currently owned by its former parent, MDU Resources Group, Inc. The shares of the company are going to be offered at a public offering price of $54 per share.
Prior to that, Knife River Corp. (NYSE:KNF) released strong financial results for Q3 2023. The company generated a revenue of $1.1 billion and a normalized EPS of $2.65 which surpassed consensus estimates by a whopping $0.80.
Following the earnings release, DA Davidson analyst Brent Thielmann raised the price target on Knife River Corp. (NYSE:KNF) shares to $68 from $58 and maintained a ‘Buy’ rating.
Like other stocks such as Amylyx Pharmaceuticals, Inc. (NASDAQ:AMLX), GE Healthcare Technologies, Inc. (NASDAQ:GEHC), and Kenvue, Inc. (NYSE:KVUE), the shares of Knife River Corp. (NYSE:KNF) are among the 13 best IPO stocks to buy heading into 2024.
7. Mobileye NV (NYSE:MBLY)
Number of Hedge Fund Holders: 30
Based in Jerusalem, Mobileye NV (NYSE:MBLY) is a company developing autonomous driving technologies and advanced driver-assistance systems including cameras, computer chips and software. To date, more than 150 million vehicles worldwide have been built with Mobileye technology inside.
Mobileye NV (NYSE:MBLY) listed as an independent public company in October 2022 separate from Intel (NASDAQ:INTC) which still retains a majority stake in the company. The company’s shares have gone up by more than 52% from the opening price when its shares started trading publicly.
On October 26, Mobileye NV (NYSE:MBLY) released its financial results for Q3 2023. Its revenue increased by 18% y-o-y to $530 million and it generated a net income of $17 million, compared to a net loss of $45 million.
On December 15, RBC Capital analyst Tom Narayan raised the price target on Mobileye NV (NYSE:MBLY) shares to $54 from $53 and maintained an ‘Outperform’ rating for the shares. The target price represents a potential upside of 25.73% based on the share price on December 22.
6. Klaviyo, Inc. (NYSE:KVYO)
Number of Hedge Fund Holders: 32
Founded in 2012, Boston, Massachusetts-based Klaviyo, Inc. (NYSE:KVYO) provides a SaaS platform that helps store and analyze data for e-commerce brands that enables them to send out personalized marketing emails and messages to potential customers. It boasts more than 135,000 customers.
On November 7, Klaviyo, Inc. (NYSE:KVYO) released its financial results for Q3 2023, the first quarterly report for the company since going public in September this year. Its revenue increased by 48% y-o-y to $176 million while it posted a net loss of $297 million.
On December 19, Needham analyst Scott Berg reiterated a ‘Buy’ rating for Klaviyo, Inc. (NYSE:KVYO) shares with an unchanged price target of $40 which represents a potential upside of 37.65% based on the share price on December 22.
This is what ClearBridge Investments, an investment management company, had to say about Klaviyo, Inc. (NYSE:KVYO) in its “ClearBridge Small Cap Growth Strategy” Q3 2023 investor letter:
“Klaviyo is a founder-led software and database platform that provides marketing automation solutions primarily to smaller ecommerce customers. Leveraging a tight integration with ecommerce enablement provider Shopify and a disruptive technology architecture, Klaviyo has experienced rapid growth in a sizable core market, with opportunities to add additional products and customer groups, including the fitness/wellness market, and to expand internationally. Throughout its history, Klaviyo has managed to balance a robust growth rate with disciplined investment and has a path to meaningful long-term profitability.”
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Disclosure: None. 13 Best IPO Stocks to Buy Heading into 2024 is originally published on Insider Monkey.
