Most ASX growth stocks have taken a beating in 2022. Are there oversold IPOs among them?

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• Most ASX IPO stocks listed since 2021 are in negative territories
• Blackrock recommends picking up good quality growth stocks
• Are there bargain opportunities out there on oversold IPOs?

The IPO market has fallen off a cliff in 2022.

There were a total of 163 IPOs on the ASX in 2021, but only 74 new listings have been recorded this year.

Investors faced with high inflation and rates have all but ditched growth stocks in favour of safer, more profitable alternatives.

Most are looking for companies that are focused more on profitability, as opposed to the growth at all costs that we saw in 2021.

But some experts believe there has been an indiscriminate selling in growth companies, and quality ones might have been caught up in the panic.

Blackrock, the world’s largest asset manager, believes some repricing was indeed warranted, such as cases of COVID-inflated earnings that were not sustainable, or businesses lacking a path to profitability.

But there was also illogical selling that Blackrock believes has created some great opportunities for stock pickers.

“The key is to be selective and risk aware, particularly in this highly uncertain macro environment,” said Philip Ruvinsky, managing director of the Fundamental Equity division of BlackRock.

“Our experience has shown us that entry points like some we’re seeing today can reward patient investors.”

Pick up strategy

Blackrock says these are times when its portfolios need to zoom in on the highest-conviction positions, and that means selling more stocks than it buys.

“We tend to add to our top 10 to 20 positions while also shopping for new ideas, seeking companies that have been unduly punished,” Ruvinsky said.

Blackrock is targeting companies that have been sold off sharply, but appear well-positioned to deliver on their long-term growth objectives.

“The extreme repricing in these cases has given us a greater margin of safety.

“Even if markets retest their June lows, we believe the entry prices are compelling enough to compensate for the added risk.”

For Blackrock, particular areas of interest include e-commerce, software and communication services.

“We’re also targeting companies that didn’t reach peak earnings post-COVID, and those we expect to be resilient in a recession,” said Ruvinsky.

Ruvinsky is very optimistic on growth stocks, and says that innovation is not stopping despite what’s happening in the markets.

“Trends toward digitisation, e-commerce and artificial intelligence, to name just a few, are firmly intact.”

He even believes that it’s an exciting time to be an active growth investor.

“Ultimately, history has taught us that financial markets reward earnings and earnings growth over time, and that is what we’re focused on as long-term fundamental investors,” said Ruvinsky.

Stockhead has compiled a list of all the IPO stocks that listed in both 2021 and 2022.

Source: https://ipowatch.com.au

ASX Tech IPOs

Tech stocks have suffered a big bear market decline in 2022.

Even global tech darlings like Apple (down 26% this year), Amazon (down 50%) and Atlassian (down 65%) could not escape the rout.

On the ASX, the tech sector comprises some interesting tech plays which could be a good pick up at these depressed prices.

Gefen (ASX:GFN) uses its proprietary AI (artificial intelligence) to disrupt the insurance and finance sectors. The platform provides digital tools that insurance and financial advisors use to personalise their service to clients. It’s a huge opportunity as commissions paid to insurance agents are expected to soar to US$462 billion in 2023.

Way2Vat (ASX:W2V) has a uniqueAI platform that’s capable of reclaiming various types of VAT (value added tax) in more than 40 countries. Billions of dollars in VAT go unclaimed each year by companies who do not understand how to recover VAT on their global corporate travel. In 2018, Way2VAT was granted the first ever patent in the US for its automated invoice analysis (AIA) technology.

RocketBoots (ASX:ROC) captures machine learning data through the use of cameras and sensors. It then applies these data to business optimisation and loss reduction strategies in industries such as consumer retail and banking. All of ROC’s software products are intellectual property (IP) protected, and include the Beehive Applications, Beehive Core, and RocketBoots Core.

ASX Healthcare IPOs

There are some potential solid pickups here, including a few biotechs that have ongoing Phase 2 and Phase 3 clinical trials.

HitIQ (ASX:HIQ) recently announced a landmark licence agreement with the English Premier League to provide concussion assessment technology. The agreement will cover players across all 20 teams and associated academies, with all head injury incidents to be digitally recorded on HIQ’s CSX platform. HitIQ also has deals in place with the NFL, AFL, NRL, and various international cricket organisations,

Chimeric (ASX:CHM) has a diversified portfolio that includes seven next-generation autologous and allogeneic therapies that utilise Natural Killer and T cells.  Its assets are being developed across 10+ disease areas in oncology, with three current clinical programs and plans to open additional clinical programs in 2023.  The current cell therapy market is valued at US$10 billion and is estimated to reach US$60 billion by 2030.

Tissue Repair (ASX:TRP) has Phase 3 clinical trials commencing in 2023 after completing a Phase 2 chronic wound clinical trial in late 2020 under an FDA approved protocol. Its flagship product is Glucoprime, a technology platform which is unique immunogenic active ingredient that improves wound healing.

ASX Financial IPOs

Non-bank lenders are the go-to plays here. These nimble fintech shares have taken market share from big banks.

Beforepay’s (ASX:B4P) business model isn’t the same as a traditional BNPL provider, but it essentially makes money the same way – by providing advanced payments to customers. Where Afterpay and Zip advance funds to buy items, Beforepay lends money against the customer’s next pay cheque, charging a flat 5% for the service. Beforepay’s app syncs with the end users’ bank account, which then automatically debits the customer’s wages (plus the 5% fee) when they land.

Pepper Money (ASX:PPM) uses technology extensively to originate loans in a completely paperless process. The non-bank lenders focuses on big ticket originations such as mortgages, automotive and equipment loans. Pepper recently acquired a 65% stake in car loan broker Stratton Finance for $78 million, bolstering its existing fast-growing asset finance business.

Propell’s (ASX:PHL) lending platform is targeting Australia’s 2.4 million SMEs who the company says are frustrated with traditional banks’ slow and difficult lending processes and paperwork. The platform is serving a potentially large addressable market as Australia’s small businesses account for 97% of the country’s enterprises.

Other recent IPOs on the ASX

Former market darling Airtasker (ASX:ART) is down almost half its market cap since IPO.

The company’s online marketplace offers local services, connecting people and businesses who need work done with those who can provide the service.

In FY22, Airtasker achieved strong growth in FY22 with Gross Marketplace Volume (GMV) of $189.6 million, up 23.8% on prior year. Revenue also increased to $31.5 million up 18.4% on the pcp.

The company continued the momentum with another strong run in Q1 of FY23. Revenue in Q1 was up 80% on pcp to $10.5 million.

The ART share price however, has been sold off by almost 50% since IPO.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

At Stockhead we tell it like it is. While HitIQ, Gefen, Way2VAT and Propell  are Stockhead advertisers, they did not sponsor this article.

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