3 Recent IPOs To Watch Closely With Eric Krull - Manager of the EJK Growth Fund - video Dailymotion

Benzinga

Eric Krull has been a full-time trader since 1999 and has been a hedge fund manager since 2010. Prior to that, he was a business strategy consultant, financial analyst, project engineer, and electrical engineer.  Benzinga's PreMarket Prep is the #1 go-to source for everything you need to know before the market opens! Join our expert hosts as they break down the latest market trends, analyze key indicators, and provide actionable insights to help you navigate the trading day ahead.

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00:00The ones I like, or the ones I'm showing here

00:02are Kava, Astera Labs, and Reddit.

00:06Kava has probably been the best performer.

00:08They, again, are a restaurant that is expanding nationwide

00:14and there have been a history of IPOs

00:17in the restaurant field that grow and grow and grow.

00:20This is like the Mediterranean Chipotle.

00:24And we all know how long Chipotle's been growing

00:26and continues to grow.

00:27You can go as far back as McDonald's

00:29and there's always been a history of restaurants

00:32that do well after the IPO.

00:34And you look at Kava, it's clearly

00:36in its institutional advanced phase

00:37and continuing to advance.

00:40And it's a good stock right now

00:42that if you rent it, it'd be a good hold.

00:44Astera Labs, they make, they work with,

00:49in the AI world, in that they make optimum efficiencies

00:53for connectivity for chips and things like that.

00:57I don't understand anything that they do.

01:00I'm not a chip expert or anything like that,

01:03but when I read about what they do,

01:05they are definitely involved with the AI world

01:08and they are pushing efficiency

01:10and we know how much power hungry AI servers are.

01:14And if you look at that,

01:15it's acting just like the way we like to see it.

01:18It came out, it made a little run,

01:20and then came down, undercut the day one low,

01:23and now it's starting in this due diligence phase

01:25to hopefully form a base.

01:27And if I see that breakout and break above the old high

01:30that's sitting there just below 90,

01:32to me, that would be a buy area.

01:34And Reddit did that already.

01:36Reddit had a really quick undercut of its day one low,

01:40it had a nice run up, and then it undercut

01:43a little bit more and formed a base,

01:44and it just broke out last week.

01:46It's more of a V-shaped base,

01:49which are a little bit harder to trade.

01:51But Reddit looks like it's above the turbulent zone,

01:54it's above its all-time high,

01:57and looking like it might be getting to run.

02:00Do they all seem to do the same thing off the bat though?

02:03They get the initial pop and all the excitement,

02:05and then a couple weeks later,

02:06they almost always seem to go down for a little period.

02:09Isn't that the case?

02:11And why do you think that is?

02:13Even looking at Reddit, you can say where it is now,

02:15but the first couple months for the stock were not good.

02:17The first couple months for Kava

02:19were not that great either.

02:20Eventually they turned it around,

02:21and these were the good ones.

02:22Some of them don't turn around.

02:23Why do you think it is they come out,

02:25the hype and everything,

02:26and then it's just buyer exhaustion right after the IPO,

02:30and everybody's excited,

02:31and then all of a sudden it's out there

02:32and people aren't as excited?

02:34Why always the hangover after the initial IPO?

02:37The why is harder to understand than the what.

02:40The what is you're exactly right.

02:41And in our book, we've studied over 3,000 stocks,

02:45and we found that the vast majority,

02:4791% undercut their day one low within the first two years,

02:5055% undercut it within three weeks.

02:53So you're right.

02:54They come out, then they get hit and then come down,

02:58and then they form this institutional due diligence phase

03:00where I think institutional investors,

03:03for the next six months to two years,

03:05they wait for some earnings reports,

03:07and if they see that the sales and earnings

03:09kind of grow into what they promised,

03:11then they start to advance.

03:13And sometimes they go quicker.

03:14Like maybe Astera Labs and Reddit,

03:17maybe already institutions are saying,

03:18we trust what you're saying, it looks like you're growing,

03:21and they start to push the stock up.

03:23But there's that initial excitement,

03:25and then they usually get punished.

03:27And then it takes a long time before institutions

03:30and other investors say, okay, we trust what you promised,

03:34and we see that you're performing.

03:35And in our book, we identified different patterns,

03:39and we named what kind of patterns those are.

03:42And we talked about like the rocket ships,

03:45the disappointments that never do anything,

03:49the late bloomers, and also,

03:54and now it's losing my mind here,

03:58but we came up with six different patterns of stocks

04:02and how they perform,

04:03and it seems to repeat over and over again what they do.

3 Recent IPOs To Watch Closely With Eric Krull - Manager of the EJK Growth Fund

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