Kenvue, the consumer health unit spin-off of Johnson & Johnson JNJ, made a solid debut on the New York Stock Exchange under the symbol KVUE on Thursday. The stock soared 22% to end the first day of the session at $26.90, pushing the market cap to roughly $50 billion.
Kenvue sold 172.8 million shares in the offering, raising $3.8 billion at the initial public offering (IPO) price of $22 per share, at the high end of the expected range. This values KVUE at about $41 billion and made it the largest U.S. IPO since EV maker Rivian went public in 2021 (read: Rough Global IPO Market: Implications for ETF Investors).
Kenvue: A Good Bet?
Kenvue is the “world’s largest pure-play consumer health company by revenue,” and makes well-known products, including Tylenol, Neutrogena, Listerine, Johnson’s, Band-Aid, Aveeno, Zyrtec and Nicorette. Per the company filing, Kenvue is profitable and expects modest growth over the next few years. It holds leadership positions across a $369 billion consumer health market that is expected to witness a compounded annual growth rate (“CAGR”) of 3% to 4% globally through 2025.
Kenvue reported annual sales of $14.95 billion in 2022, with pro forma net income of $1.46 billion. Ten of Kenvue’s brands had approximately $400 million or more in sales last year. For the first quarter, which ended Apr 2, Kenvue is estimated to have raked in sales of $3.85 billion and net income of around $330 million. The company also expects to pay a quarterly cash dividend of about 20 cents per share starting with the third quarter, which ends Oct 1.
Kenvue’s debut also marks the largest restructuring in JNJ’s 135-year history. JNJ announced the split in late 2021 as a bid to streamline operations and refocus on its pharmaceutical and medical device divisions (read: ETFs to Buy on Solid Q1 JNJ Earnings Results).
How to Bet?
The successful market debut of Kenvue could pave its entry into a number of ETFs in the coming days. Investing in IPO ETFs could be a compelling way to enter the IPO business without directly investing in individual companies. IPO ETFs are funds that invest in a basket of companies that have recently gone public, providing diversified exposure to the IPO market.
Investors seeking to take advantage of the established product names could bet on these ETFs in the months ahead.
Renaissance IPO ETF (IPO)
Renaissance IPO ETF provides exposure to the largest and most-liquid, newly listed companies by tracking the Renaissance IPO Index. New companies seek inclusion on a fast-entry basis on the fifth day of trading. The fund currently holds 88 stocks in its basket, with double-digit exposure to the top two firms. Technology is the top sector accounting for 47.7% share, while consumer discretionary, healthcare and financials round off the next three spots with double-digit allocations each.
Renaissance IPO ETF has amassed $126.9 million in its asset base while it trades in a light volume of about 35,000 shares, probably implying additional cost beyond the expense ratio of 0.60%.
First Trust US Equity Opportunities ETF (FPX)
First Trust US Equity Opportunities ETF focuses on the largest, best-performing and most-liquid U.S. IPOs, and follows the IPOX-100 U.S. Index. New companies can find entry into the fund’s holding after trading for a minimum of 100 days. First Trust US Equity Opportunities ETF holds 100 securities in its basket, with the largest allocation going to the top four firms with nearly 7% share each, while other securities hold no more than 4.3% of the assets. The ETF is widely spread across sectors with information technology, industrials, healthcare and consumer discretionary.
First Trust US Equity Opportunities ETF has $750.3 million in AUM and trades in a volume of about 26,000 shares per day. It charges 60 bps in fees a year (see: all the All-Cap Growth ETFs here).
Invesco S&P Spin-Off ETF (CSD)
Invesco S&P Spin-Off ETF tracks the S&P U.S. Spin-Off Index. It is composed of companies that have been spun off from larger corporations within the past four years. It holds 28 stocks in its basket, with the largest allocation going to the top five firms that have nearly 7% share each. Other securities hold no more than 5% of the assets. Invesco S&P Spin-Off ETF is heavy on industrials at 40.4%, while healthcare and technology round off the next two spots, with a 16.1% and 9.5% share, respectively.
Invesco S&P Spin-Off ETF has accumulated $52.1 million in AUM and trades in a volume of under 1,000 shares per day. It charges 65 bps in annual fees.
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Johnson & Johnson (JNJ) : Free Stock Analysis Report
Renaissance IPO ETF (IPO): ETF Research Reports
First Trust US Equity Opportunities ETF (FPX): ETF Research Reports
Invesco S&P Spin-Off ETF (CSD): ETF Research Reports
Kenvue Inc. (KVUE): Free Stock Analysis Report
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