The latest IPO is the
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NEW YORK » If you weren't able to buy shares of the summer's hottest initial public offering, Baidu.com, fear not. History shows that investors may be better off without the IPO of the moment.

IPOs that doubled, tripled or quadrupled their first day of trading have often come to bad ends. IPOs with less stellar first days don't exactly burn up the tracks with their long-term performance either. The fact is, IPOs in general may not be as good an investment as many investors believe.

Jay R. Ritter, a professor of finance at the University of Florida who specializes in IPOs, studied IPO companies' five- year stock performance versus companies of the same size and book-to-market ratio, which is the value of a company's assets weighed against its market capitalization.

What Ritter found, studying the period between 1970 and 2003, was that IPOs had lower returns than similar companies by 4.1 percent over five years. He broke his research down into decade-long chunks, but the results were the same: IPO returns were lower than their peers.

What about the must-have IPOs, the one-day wonders? Ritter also created a list of the biggest one-day winners, companies that doubled their first day of trading.

Investors who held onto some of those companies, including auction gorilla eBay Inc., are flush indeed. But many of the companies that doubled on Day One fell hard.

While Baidu.com's one-day run up of 354 percent on Aug. 5 is the envy of investors everywhere, who wants to admit they bought into the December 1999 IPO of VA Linux, which rose 697.50 percent in its first day of trading? Or Globe.com, which rose 606 percent the day it debuted?

Only investors who dumped those stocks at the perfect time have reason to be smug. VA Linux, now called VA Software Corp., trades around $1.59 a share, down from $239.25 at the end of the day it debuted. Globe.com, which moved from an Internet portal to a computer game and entertainment company to an Internet telephone company, closed yesterday near 14 cents a share, a precipitous drop from its closing price of $63.50 the day it debuted.

Some of the other Top 10 one-day wonders are Webmethods, which rose 525 percent its first day of trading, Foundry Networks, which soared by 525 percent its first day, and Akamai Technologies Inc., which closed 458 percent higher. All three stocks took a sled ride after the Internet bubble burst and have never recovered.

You could dismiss the one-day run-up as a phenomenon limited to technology bubble stocks from the market's silly days.

But hot IPOs have blown up for a variety of reasons both before and after the bubble. Some manipulated their pre-IPO numbers to make the company look more appealing, some businesses were fads that deteriorated and some simply didn't have the controls or the management needed to run a public company.

Fuddruckers restaurant was the belle of the ball when its stock debuted in 1983, going from $7 to $14 on its first day. By 1997, it had become part of a larger parent and its sales were faltering. In 1999, it was bought by a British restaurateur who told Nation's Restaurant News the chain was "the most boring restaurant in the world ... 6,000 square feet of nothing ... It looked like a cafeteria in a Chrysler work plant."

If you insist on investing in IPOs, and you can get in on the first day, what should you look for?

Watch for companies that have $50 million or more in annual sales, the best predictor of an IPO's long-term performance, Ritter said.

"If it hasn't achieved the $50 million threshold in annual sales, on average, the company will underperform the stock market in the three years after going public," Ritter said.