On an otherwise up day for the market, shares of Fitbit Inc. (FIT) stumbled…again. The fitness tracker company can’t seem to catch a break this year. In the past two weeks alone, Fitbit has gotten sued for inaccurate heart rate readings, underwhelmed investors with its newest fitness watch, and encountered problems with counterfeit Fitbits. And this news has taken its toll on FIT shares, which have plunged 37% since December 31.
The case with Fitbit has underscored exactly why I avoid newly-public companies for the first year or so. In fact, when FIT went public last June, I recommended holding off on Fitbit until it had a chance to prove itself. In my opinion, new investments require at least four quarters’ worth of data, so that we can properly assess their profit potential.
For that very reason, I don’t add stocks to Portfolio Grader until they have four quarters under their belts. While FIT doesn’t yet qualify for Portfolio Grader, several of 2014 and 2015’s hottest IPOs have recently been added to the stock rating tool. Let’s take a look at what they have to offer:
|Ticker||Company||Quantitative Grade||Fundamental Grade||Total Grade||Performance Since IPO|
|FCAU||Fiat Chrysler Automobiles||B||C||C||18%|
|PLAY||Dave & Buster’s Entertainment||A||B||B||104%|
As you can see, IPOs can be very hit or miss. On average, these stocks have gained 12% over their lifetimes, which is an average of 17 months. To be sure, that is better than the S&P 500’s 1.4% decline over the past 17 months. However, if you’d rather avoid double-digit losses (like FIT, GPRO and TRUE shareholders are experiencing right now), I’d recommend avoiding newly-public companies for the first four quarters.
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