Late last year, a little-known automotive technology firm quietly went public on the Nasdaq. Unlike most initial public offerings (IPOs), there was no media blitz, interviews on CNBC or ringing of the bell on the Nasdaq.
The company is named CDK Global (NASDAQ: CDK).
In the first few days, trading was extremely heavy. Sellers outnumbered buyers. And by the end of its second week as a public company, CDK shares had sunk 19%.
But then something happened. The stock bottomed out overnight, and immediately started rising. One month later, the shares had popped 68%.
By summer, the stock had soared 124%. It was an impressive move for a little-known stock.
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Discover the Secret of This ‘Quiet IPO’
If you’re like most investors, you’ve never heard of CDK Global. But don’t worry, that’s not the point of this story.
When CDK went public, its market capitalization was $2.4 billion. That was enough to make the stock a mid-cap company. As a result, shares were under the radar of most institutional investors.
Unlike most newly public companies, CDK was previously part of a huge American corporation. That firm was Automatic Data Processing (NASDAQ: ADP), known by most people as simply ADP.
Founded in 1949, ADP is the largest outsourced payroll processing company in the world. It serves 610,000 companies in more than 100 countries. Many businesses – including mine – use ADP to manage payroll for employees.
Payroll and human resources were a big part of ADP’s business. But over the years, the company expanded into other sectors.
One of those new businesses was called ADP Dealer Services. The division provided critical information technology solutions to the automotive sector. Over several decades, that business grew at an impressive clip. By 2014, it served 26,000 auto dealers and generated annual revenues of $2 billion.
With the auto sector booming, ADP decided to make a big move. Dealer Services would become an independent company. That company was named CDK Global.
As a new public company, CDK could set its own course. It could expand without the constraints of being part of a $35 billion company. And it could better incentivize its employees.
The results have been phenomenal. Management has shown a strong commitment to shareholders. In December, CDK paid its first dividend. And in January, the company announced that it would buy back 10 million shares of stock.
Shares have responded positively to these moves. Year-to-date, the stock is up 17%. That may not sound very impressive. But remember that the S&P 500 is down more than 6% this year.
That means this stock is crushing the S&P 500 by 23%.
Less than one year since its quiet IPO, CDK’s value has soared 216%. And today, the company is valued at $7.6 billion.
CDK Global is a rare breed of new public companies. Last year, just 36 companies went public in a “quiet IPO.”
For the last few months, I’ve been researching these little-known companies. What I’ve found is remarkable. After going public, they crush the market for at least one year.
The best part is that anyone can buy these stocks. You don’t need to be rich, well connected, or an accredited investor. In fact, you don’t even need to rush to buy the stock on the day it starts trading. Our research shows that it’s best to wait a few weeks before entering a position.
On Wednesday, I released an urgent alert regarding two stocks to buy. Both are similar setups to CDK Global. These stocks appear to have bottomed in the last few days. And I expect them to trade up in the next couple weeks.
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