By SARAH MORGAN
When will Facebook go public? The better question might be, who cares? Despite all the hoopla over hot dot-com IPOs this year, so far the real winners have been ho-hum consumer companies.
Initial public offerings from consumer-sector stocks have outperformed those from all other sectors this year, according to fund tracker Morningstar, with an average 4.4% return. Before this month's market volatility, that average was closer to 20%. Vitamin retailer GNC Holdings (GNC),
Perhaps investors shouldn't be surprised. Consumer companies have been the best performers this year in the IPOX index, which is composed of companies that have gone public in the past four years, says Josef Schuster, the portfolio manager for the Direxion Long/Short Global IPO fund (DXIIX). The reason: While consumers have put off big-ticket purchases, they are still buying the lattes, tea and accessories offered by newly public companies Dunkin Brands, Teavana, and Francesca's Holdings (FRAN),
Not everyone is so bullish. The consumer-focused firms that went public this year appealed to investors looking for young, fast-growing firms -- often the first stocks investors bail out of when markets get choppy, Schuster says. "They can go down 50% in a few days," he says. It's also unlikely that more deals will hit the market until it calms down; recent volatility has effectively shut down the IPO market. Although the break could turn out to be a helpful cooling-off period for a heated market, Schuster says. "Now IPOs will need to come cheaper to incentivize investors," he says.
Still, consumer companies that went public this year are so doing well. In fact, it's the only sector where the average IPO is in the black this year. The tech sector, which includes the IPOs of social networking site LinkedIn (LNKD)
Investors who want exposure to the IPO universe can consider Renaissance Capital's $10.8 million Global IPO Plus fund (IPOSX), up 5.6% in the past year, which buys IPOs the firm's research team predicts will outperform. The fund's top holdings include Vitamin Shoppe (VSI)