Stealth IPOs to Put on Your Radar

 | Sep 08, 2012 | 2:45 PM EDT
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I often get some ribbing from fellow columnists or stock analysts for uncovering less-than-glamorous industries. That doesn't bother me because, for the past decade, I've been relying on technical scans for my first look at stocks with upside potential.

The names that show up on my scans are not necessarily the much-talked-about techs or retailers -= the so-called "hot" names of the day. Instead, I tend to see little-known companies, often from decidedly unsexy industries, that are showing an outstanding combination of fundamental and technical strength.

One such name is Thermon Group (THR). This company makes engineered thermal solutions for industrial and construction applications.

For most people, that's not nearly as much fun to discuss as something like a Facebook (FB), Groupon (GRPN) or Yelp (YELP).

For shareholders, though, Thermon has been a whole lot more fun. The stock went public at $12 in May 2011. It rallied to an all-time high of $25 on Thursday, and was trading at around $24.41 Friday.

This is more or less a stealth company not only because of its industry, but because of its size: Thermon has market capitalization of just $741 million, and it trades only 101,000 shares per day on average. That means it won't be an institutional favorite, although the number of U.S.-based institutional owners has been growing.

As of Friday, the stock was extended about 2% from its five-day exponential moving average. A pullback with support at that line, or to the 15-day line, could offer a buy opportunity in the not-so-distant future.

Another heating-related stock that's near all-time highs is Nortek (NTK). This is another small company, and its stock is even more thinly traded than Thermon is, with 24,000 shares changing hands per day. In addition, it also had its initial public offering fairly recently, having made its Nasdaq debut in November.

The company is actually a conglomerate, with business units in the areas of ventilation products, heating and cooling systems and other home-hardware products. It has historically grown through acquisition.

Last month, the company announced formation of what it calls Core Brands, which brings various business units under one umbrella.

The stock has nearly doubled in price so far this year. It was trading at around $51.92 Friday, continuing to bounce along its 10-week average, as it's been doing since late July. For aggressive traders, or those who have some patience during a consolidation, this stock is currently in buy range.

Personally, I like to see more upside momentum before I attempt a buy. Nortek is perched just below its five0day exponential line, and its five-day, 15-day, and 50-day lines are bunched closely together. That's an indication of the range-bound nature of the stock's trading in the past couple of months.

Also, I have to issue my usual caveat about thin stocks. While Nortek has thus far avoided a sudden, sharp pullback, when turnover is sparse it's always good to be aware of that. A glance at a weekly chart shows a wide-and-loose trading character for most of its run-up.

Because this stock is so small, few analysts cover it. That adds extra risk, as it's not a name institutions are currently getting behind.

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