3 Recent IPOs Poised for Gains

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Newly public stocks are generally some of the market’s best gainers. Buying growth names can be risky in a volatile market, but some of these new stocks are positioned for gains in the next uptrend, writes MoneyShow.com contributor Kate Stalter.

Even in uncertain economic and market conditions, I regularly run scans of recent (and fairly recent) IPOs. Stocks that went public in the past decade or so frequently show up among the ranks of the market’s best price gainers.

The IPO market has dried up in the past couple of months, but when I scanned for stocks that made their debut in 2011, several popped out with a good combination of fundamental and technical strength.

Vitamin and supplement retailer GNC (GNC) has been climbing out of a price consolidation that began in August. Upside volume in the past three weeks has been heavier than normal, a bullish signal for the stock.

After going public on the NYSE on April 1, the stock rallied to a high of $26.48 in the next four months. It ! pulled b ack along with the general market over the summer. That’s not surprising, because the majority of stocks—even price leaders—tend to trade in tandem with the broader market trend.

There were some pros and cons about GNC’s consolidation. One negative factor was the volatile trade as it formed a base. It’s mitigated somewhat because the market itself was unusually volatile over the summer (and into the autumn), so plenty of stocks sported erratic price swings.

On the plus side, the stock formed a double-bottom consolidation, which can often precede further price gains.

GNC has some good fundamental indicators, as well. The company has been growing its free cash flow in recent years, a characteristic of many market leaders. In addition, Wall Street currently has confidence in the mid-cap, expecting earnings growth of 41% this year and another 17% in 2012.

I’d consider the stock to be in a technical buy range at the moment, because it’s not too far extended beyond its latest point of resistance, just below $25. However, as I’ve been noting for months in this column, broad-market headline risk threatens to sink even strong performers attempting to break out, so caution is warranted.