IPO Stocks Can Be Lucrative: Here's How To Buy Them

Initial public offerings like Medline (MDLN) can get a lot of attention — and rightly so. The medical supplier priced at 29 Wednesday night, opened at 35 and closed at 41 on its first day of trading. Medline stock may or may not go on to form an IPO base from here. But with the market for initial public offerings expected to pick up some steam in 2026, let’s examine the characteristics of an IPO base.

An IPO is a company’s first offering of stock to the public. Once the stock trades on the New York Stock Exchange, Nasdaq or other sanctioned venue, an investor can purchase shares.

Investors are often tempted to buy an IPO when it soars on its first day of trading. But that first day is often volatile. With no trading history, price action in IPO stocks often whipsaws. That’s why it’s best to be patient and wait at least a few weeks for an IPO base to take shape.

The decline from peak to trough in an IPO base tends to be less than 20%, but it can be more, depending on stock market volatility. The length is often less than five weeks, and can be as short as seven days. Google-parent Alphabet (GOOGL) broke out of a classic IPO base on Aug. 19, 2004, after it consolidated sideways for three weeks. It broke out with conviction on Sept. 16 that year and never looked back.

IPO Stocks: Where To Look For Bases

More recently, CoreWeave (CRWV) jumped out of a five-week IPO base earlier this year in May and nearly tripled in less than three months. The IPO base showed a somewhat steep pullback of 48%, but the stock market was also pulling back sharply at the time as well.

Keep an eye out for these bases using the IPO Leaders screen at investors.com. It’s found by clicking the Stock Lists tab along the top of the homepage.

In some cases, you might find some recent stocks in the IPO Leaders screen with not-so-great Earnings Per Share ratings, but strong scores elsewhere. In this case, a lukewarm earnings score can be excused because some IPO stocks don’t have a long-term record of profitability. But in many cases, they’re right on the verge of profitability.

Not too many people knew about Palantir Technologies (PLTR) when it blasted out of a short IPO base in early November 2020. The company pursued a direct listing on Sept. 30, priced at 10 on its first day of trading and closed at 9.50.

It was a less-than-stellar debut, but Palantir started moving sideways after that and eventually completed an IPO base that showed a relatively shallow pullback of 22%. The breakout was during the week ended Nov. 6 (1), when shares soared more than 35% in higher volume.

Follow Ken Shreve on X @IBD_KShreve for more stock market analysis and insight.

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