One of the interesting things about the IPO market is that often after the original excitement about the initial public offering fades, investors forget about the companies, and they tend to sometimes get lost in the shuffle. The good thing for investors is that sometimes, but not always, the initial float from the deals are rather small, and that bodes well when the companies start reporting earnings, especially if they are positive.

We ran a screen of the Merrill Lynch research universe looking for IPOs that priced over the last year or so, and found three very intriguing stocks that may be just the ticket for aggressive trading accounts. All of the stocks that we found are rated Buy at Merrill Lynch, and all could be great additions to portfolios for an end of the year run.

Aduro Biotech

This stock had a super-successful IPO back in the spring, but after skyrocketing up it has been cut in half. Aduro Biotech Inc. (NASDAQ: ADRO) is a clinical-stage immunotherapy company focused on the discovery, development and commercialization of therapies that transform the treatment of challenging diseases. Aduro’s technology platforms, which are designed to harness the body’s natural immune system, are being investigated in cancer indications and have the potential to expand into autoimmune and infectious diseases.

Aduro’s LADD technology platform is based on proprietary attenuated strains of listeria that have been engineered to express tumor-associated antigens to induce specific and targeted immune responses. Based on compelling clinical data in advanced cancers, this platform is being developed as a treatment for multiple indications, including pancreatic, lung and prostate cancers, mesothelioma and glioblastoma.

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Merrill Lynch remains very positive and noted that Aduro recently announced a milestone payment from Janssen for the submission of an IND for ADU-214 in advanced non-small cell lung cancer. The dose-escalating Phase 1 study will evaluate safety and immunogenicity of intravenously administered ADU-214. Janssen is expected to commence the study by the end of this year. Aduro could be eligible to receive up to $786.5 million in additional milestone payments and royalties on worldwide sales.

The Merrill Lynch target price for the stock is $40, and the Thomson/First Call consensus price target is higher at $47. Shares closed Friday at $27.02.
Alibaba

This time last year, this company was the hottest thing on the planet. Alibaba Group Holding Ltd. (NYSE: BABA) is the largest online and mobile commerce company, as measured by gross merchandise volume, and it had the highest profile IPO of 2014. The stock has acted horrible since printing highs at $120 in mid-November of last year. Plain and simple, Merrill Lynch feels the dominance in Alibaba’s core business, the very hard barrier to entry for competition and new growth opportunities like cross-border e-commerce make the stock extremely attractive. With most of the damage to the China equity markets seemingly subsided for now, the residual effect to the company may all subside some.

The company recently made a non-binding offer to Youku Tudou to acquire the 82% of the company that Alibaba doesn’t already own. This comes as little surprise to Wall Street, given Jack Ma’s vision for digital content and delivery. The Merrill Lynch team see a few of the leading video sites continuing to struggle, but they also see a ton of synergies overall in the combination.

The Merrill Lynch price target is a conservative $103. The consensus target is $94.59. The shares closed Friday at $83.61.

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Seres Therapeutics

This hot deal came public back in June, and a fall sell-off could be just the entry point traders are looking for. Seres Therapeutics Inc. (NASDAQ: MCRB) is a leading microbiome therapeutics platform company developing a novel class of biological drugs designed to treat disease by restoring the function of a dysbiotic microbiome. The company is developing treatments for diseases of the colon. Its SER-109 is in Phase 2 clinical studies for treating recurrent hospital acquired clostridium difficile infection.

Merrill Lynch recently upgraded the stock and pointed out in a research report that SER-109 has orphan and breakthrough status and addresses under what the firm feels is an undermet need in infectious disease. The analysts feel that they can see lower risk for pricing pressure relative to larger categories. They also recently toured the company’s facilities and feel that ability of Seres to ensure safety via ethanol filtration is very positive and they think increases the chances for FDA approval.

The company is also focused on treatments for additional drug-resistant bacteria, inflammatory bowel disease, type 2 diabetes and metabolic syndrome, all of which could have solid potential in the pipeline for the future.

While the Merrill Lynch price target is $41, and the consensus target is higher at $46.75. The stock closed on Friday at $31.57.

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It is extremely important to note that two of these companies are clinical stage bio-pharmaceutical plays, and the third, while highly profitable, is based in China and that always leaves it open to scrutiny. These are only suitable very high risk-tolerant accounts that can afford loss of capital. With that in mind, they also have tremendous upside potential.

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