5 recent red-hot IPOs added to Russell 2000

Last year was a monster year for the initial public offering market, and 2021 looks like it could provide a repeat performance. With a very willing and receptive audience of investors looking for new companies to invest in, and the growing emergence of special purpose acquisitions companies (SPACs) after years of very little interest, the current market is very strong.

The interest in SPACs has grown exponentially. Also known as blank check companies, they are actually shell corporations listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process. One of the highest-profile recent deals was DraftKings, which started as a SPAC.

A recent Jefferies report points out that next week a stunning 39 recent IPOs will be added to the Russell indexes, which include the Russell 2000 and the Russell 1000. Those that are added should see some significant buying, as index funds and managers will need to buy the shares.

The report noted: “There has been no let-up in the surge of IPOs so far this year. If anything, the pace has accelerated. Many of the IPOs are SPACs and not included in the Russell indexes until they de-SPAC and fit the Russell inclusion criteria. Based on the rolling 12 months, we calculate 853 companies have gone public, raising a record $172.6 billion. The last time we saw this level of activity was in February 1997. This level of activity does worry us, as when the number of deals falls into Quintile 1, based on history, small caps subsequently post below-average performance. The returns, however, are not in the red.”

We screened the list of stocks that will be added to the Russell indexes that could see five days of buying pressure prior up to the March 19 inclusion date, according to Jefferies. We found five that could be very interesting ideas for aggressive growth investors.

908 Devices

This stock has been on fire since its debut, but it has backed up recently and makes sense for aggressive investors. 908 Devices Inc. (NASDAQ: MASS) develops and sells measurement devices for chemical and biochemical analysis in the United States, China, Japan, Europe and elsewhere.

The company develops its products using mass spectrometry technology, an analytical technique for molecular analysis. It offers handheld and desktop devices for the point-of-need applications in life sciences research, bioprocessing, industrial biotech, forensics and adjacent markets.

The company’s products include MX908, a handheld, battery-powered and mass spectrometry device that is designed for rapid analysis of gas, liquid and solid materials of unknown identity. Its Rebel desktop analyser provides realtime information on the extracellular environment in bioprocesses. And ZipChip is a plug-and-play, highresolution separation platform that optimizes mass spectrometry sample analysis.

Cowen has an Outperform rating and a $74 price target, and the Wall Street consensus target is $67.50. The shares surged almost 14% on Thursday to close at $53.37.

Bolt Biotherapeutics

Trading at levels that are far from extended, this stock looks like a very enticing play now. Bolt Therapeutics Inc. (NASDAQ: BOLT) a clinical-stage immuno-oncology company engaged in the discovery, development and commercialization of pharmaceutical products.

Bolt Therapeutics develops BDC-1001, a human epidermal growth factor receptor 2 (HER2) for the treatment of patients with HER2-expressing solid tumours, including HER2-low tumours. Its preclinical stage product candidates include carcinoembryonic antigen program for colorectal, non-small cell lung, pancreatic and breast cancers; programmed cell death-ligand 1 program for tumours that are nonresponsive to immune checkpoint blockade; and myeloid modulators.

Morgan Stanley’s Overweight rating comes with a $45 price target. No consensus target was available. The share closed Thursday’s trading at $37.47, up over 5% on the day.

Midwest

This is one of the few being added that is not a biotechnology or medical device play. Midwest Holdings Inc. (NASDAQ: MDWT) is a financial services holding company engaged in underwriting and marketing life insurance products in the United States. It offers multiyear guaranteed and fixed indexed annuity products.

So far, institutions have a very small stake in Midwest Holdings. That may indicate that the company is on the radar of some funds, but it is not particularly popular with professional investors at the moment. If the company itself can improve over time, more institutional buyers are possible in the future. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. Especially when a company is added to a major index.

The Piper Sandler Buy rating is accompanied by a $76 price target, which is the same as the consensus target. The stock closed at $49.38 on Thursday.

Neximmune

After a sizable move following the IPO, this stock has pulled back nicely and offers an intriguing entry point. Neximmune Inc. (NASDAQ: NEXI) is another clinical-stage biotechnology company. It is engaged in developing therapies with curative potential for patients with cancer and other life-threatening immune-mediated diseases.

The company develops approaches to T cell immunotherapies based on its proprietary Artificial Immune Modulation technology. The company has two product candidates in human trials, including NEXI-001 in acute myeloid leukaemia and NEXI-002 in multiple myeloma.

The company is developing a novel approach to immunotherapy designed to orchestrate a targeted immune response by directing the function of antigen-specific T cells.

As the company remains in its post-IPO quiet period, there are no analyst recommendations or price targets. Thursday’s last trade hit the tape at $23.06, a share, which was up over 9% for the day.

Ortho Clinical Diagnostic

This is perhaps a more conservative idea for investors looking to avoid biotech companies and has been around since 1939. Ortho Clinical Diagnostic Holdings PLC (NASDAQ: OCDX) engages in the vitro diagnostics business in the United States. The company offers automated instruments, as well as assays, reagents and other consumables that are used by these instruments to generate test results.

Its solutions include clinical chemistry and immunoassay instruments and tests to detect and monitor disease progression across a broad spectrum of therapeutic areas, including COVID-19 antibody and antigen tests. They also include immunohematology instruments and tests for blood typing to ensure patient-donor compatibility in blood transfusions, as well as donor screening instruments and tests for blood and plasma screening for infectious diseases.

The company also engages in contract manufacturing activities and provides ortho-care services. Its products are used in hospitals and laboratories, and in physician offices, clinics, blood banks, donor centres and other specialty settings.

Goldman Sachs rates it as a Buy with a $27 price target. Once again, no consensus per se, though many firms have coverage. The closing price on Thursday was $16.87 a share, after a gain of over 6% on the day.