IPO stocks aren't for the faint of heart.
Most new issues underperform the broad market, a sign of the "creative destruction" of free markets as losers tend to outnumber winners, but that doesn't mean that investors should steer clear of IPOs. After all, stocks that hit it big deliver huge returns for early investors. For instance, you would be a millionaire now had you dropped $1,000 on Home Depot stock at its 1981 IPO.
The last two years have seen a bevy of new stocks hit the market, including a number of "unicorns" (start-ups with billion-dollar valuations). This has given investors plenty of options if they're looking for new stocks to follow. Keep reading to see why IPO investors may want to add Pinterest (NYSE: PINS), Luckin Coffee (NASDAQ: LK), and DataDog (NASDAQ: DDOG) to their watchlist.