This Recent Frenzy Shows Investors Are 'Risk On'
Dear subscriber,
If you look at one particular corner of the market, you'd think we were back in the wild bull days of the dot-com boom...
Over the past few weeks and months, it has offered lucky investors multiple chances to double their money in a single day.
I'm talking about the recent flurry of highly bullish initial public offerings ("IPOs").
IPOs are when privately held companies come to market to trade publicly for the first time. They're an opportunity for these companies to raise money, for early investors to cash out, and for many other individual and retail investors to finally buy stock.
The IPO market had been quiet the past few years. During the bull market of 2020, we saw lots of new companies go public, fueled by low interest rates and high valuations.
But after the market crash of 2022, IPOs slowed to a crawl. Many companies delayed or retracted their IPO plans to wait for better conditions.
Conditions are apparently much better now...
Since the start of the year, we've seen a whole bunch of big-name, big-value IPOs soar for early investors. And it says something important about the state of the market...
Specifically, investors are gaining an appetite for risk... at a time when it doesn't make sense to do so.
Take CoreWeave (CRWV), for example...
The company provides cloud-computing infrastructure for artificial-intelligence ("AI") applications, making it a direct play on the AI boom.
It's a new company – founded in 2017 – that began as a crypto-mining operation before pivoting to focus on AI.
The company went public in March at $39 per share. It quickly shot up to $60. And now, it's trading at more than $180 per share and sports a market capitalization of roughly $88 billion...
It's a similar story with Circle Internet (CRCL). This company operates blockchain-based peer-to-peer payment networks. Its main product is the USDC stablecoin (a cryptocurrency pegged to the U.S. dollar), which currently has a market cap of more than $60 billion.
Circle went public at $31 per share earlier this month. The next day, it traded at $83 per share – a 168% gain. Currently, the stock trades at more than $240...
That's not all. Since May...
- Brokerage app eToro (ETOR) went public at $52 per share and shot up to $76.
- Digital-health company Hinge Health (HNGE) went public at $32 per share and surged to $42.
- Actor Ryan Reynolds-backed digital-marketing company MNTN (MNTN) went public at $16 per share and rocketed to $27.
- Drone maker AIRO (AIRO) went public at $10 per share and shot up to $30.
- And defense company Voyager Technologies (VOYG) went public at $31 per share and immediately soared to $56.
IPO surges like this are big. As we've seen, they can double your money in just a few days and make founders and early investors rich practically overnight.
But they're also a warning...
IPOs have always been a risky part of the market.
They tend to be young growth companies with a bright future but a short track record of results. And overall, the fundamental investment case for many of these IPOs is a little spotty.
Take Newsmax (NMAX), for instance. The alternative cable-news company went public at $10 per share in late March. Shares surged above $230 the very next day – a 2,200% return.
Whatever you think of Newsmax as a business, this was clearly some sort of meme-stock-style frenzy. The company earns about $171 million in revenue... And at its peak, it was valued at $30 billion.
That's straight-up crazy.
And clearly, the frenzy couldn't last. Newsmax has since coasted steadily down, right about back to where it was when it went public...
History shows that IPOs with huge, early pops tend to fall flat on their face.
According to research from Jay Ritter, a professor of finance at the University of Florida, there were 316 IPOs between 1980 and 2023 that doubled in their first day of trading. And nearly 90% of those had negative returns after three years. The average loss was 46%.
Now, some of these businesses may thrive and go on to justify their valuations... But most of them won't.
Instead, this IPO boom shows me that investors are happy to take heavy risks today in search of high upside.
As you can see, the market has been on a bull run since the April bottom of the "tariff tantrum"...
But it's not just that the market has rallied. It's that the rally has come in many of the riskiest assets.
The market leaders since the April 8 bottom have been bitcoin, IPOs (as measured by the Renaissance IPO Index), and technology stocks...
Meanwhile, safer parts of the market like consumer staples and health care just can't catch a bid.
It's the same in the bond market. High-yield bonds have surged while investment-grade bonds have fallen behind...
Of course, much of this is to be expected after President Donald Trump pulled back on some of his tariffs.
The risky stuff falls the most in crashes, and therefore it tends to recover the most in the rally afterward. That's markets 101.
But investors' heavy risk-taking doesn't align with what we're seeing in the headlines...
Tariffs are (still) on the horizon. A recession may be bearing down on us. We have a serious budget standoff. And the world is on the brink of a major war.
That doesn't read like a risk-on environment to me. On the contrary, I'm inclined to tilt my positioning to a defensive stance here.
In sum, investors should proceed with caution today. Stay on your toes. Watch the flow of IPOs both for short-term opportunities and for signs of excess in the financial sector.
And if you do trade any of these newly public companies, make sure you know the difference between what's a quick trade and what's a long-held investment. Because hot IPOs eventually cool off.
What Our Experts Are Reading and Sharing...
War can affect stocks, oil prices, and even consumer behavior. Between the ongoing war in Ukraine and now the Israel-Iran war, we're seeing that in real time. Our own Corey McLaughlin recently discussed the conflict in Eastern Europe and the Middle East in Tuesday's Stansberry Digest – including what he sees as a "growing world war," the implications for the market, and what's next for one "chaos hedge."
Wall Street's latest obsession is packaging up "alternative" and "private" investments for everyday investors. But as Jason Zweig warns in the Wall Street Journal, you should tread carefully with these investments. While alternative assets have produced higher returns in the past (and for privileged investors), that doesn't mean they'll continue to do so... especially when crammed into public funds.
If someone on social media pitches you a stock you've never heard of... don't buy it. Scammers are reaching out to people via social media apps and encouraging them to buy into Chinese IPOs and other small stocks. You know what happens next... They crash 50%, 90%, or more.
New Research in The Stansberry Investor Suite...
With IPOs, you can invest in new companies that do all kinds of exciting things.
But oftentimes, the best way to invest is with the established players... those that have been doing the same exciting things for years if not decades.
This month, the team at Stansberry Innovations Report has found one such company. And it deals in a technology that has gone from science fiction to mundane reality.
I'm talking about "intelligent" vehicles – those with driver-assist tech and self-driving capabilities.
Driver-assist features aren't necessarily cutting edge in 2025. Today, they're pretty much standard for every vehicle. But they weren't always. And now, advanced features – like hands-free driving, for instance – are becoming more popular. So are autonomous vehicles themselves.
Of course, all these features and tech take specific hardware – cameras, sensors, and processors – that needs to be specially designed to allow these cars to "see" and "think."
And here's the thing... It gets expensive.
But this month, the Innovations Report team has found a company that solves that problem...
This company does things differently than its competitors. As its CEO says, "You cannot have a car with $70,000 of equipment and imagine that it will go to mass production."
Instead, this company pairs its own chips with special camera software to bring the cost closer to $6,000 per car.
This company's tech is already in more than 200 million cars worldwide – but this is just the start. Cars are going to get smarter, and investors will benefit along with drivers. As the Innovations Report team puts it, "Intelligence is the new horsepower."
Stansberry Investor Suite subscribers can read the entire report here.
If you don't already subscribe to The Stansberry Investor Suite – and want to learn more about our special package of research – click here.
Until next week,
Matt Weinschenk
Director of Research
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