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Is the IPO market about to finally open up?

It's been a long, dry spell. The IPO window has been closed since mid-December, with the exception of a small handful of biotech companies. It has been the victim of poor returns — 70 percent of the IPOs last year are trading below their IPO price — and the market downturn from December through mid-February.

But that may be changing. The two most important indicators of the near-term IPO market — recent IPO prices and the overall market — have dramatically turned around. Consider:

1) the S&P 500 is up roughly 10 percent from its Feb. 11 low,

2) and the Renaissance Capital IPO ETF, a basket of the last 60 IPOs, is up roughly 18 percent in that same period.

Markets are up strongly, with IPOs dramatically outperforming. That is a good sign.

Those kinds of numbers, if they hold up for the next week or so, strongly suggest the IPO window will re-open soon.

But will we see a flood of IPOs, as we did early last year, only to have them disappoint, as so many IPOs did late last summer?

We don't know, since so much depends on the state of the overall market. But there is some good news. Once the IPO market opens up after long droughts like the one we have seen, it significantly outperforms the S&P 500 for the next 3 months. The performance is about six times better.

That's significant.

Renaissance Capital (which runs the IPO ETF) has looked at similar periods of IPO droughts in the past, periods where the IPO market has essentially shut down for 30 days or more. The current drought has been going on for more than two months.

Since 2002, there have been 11 times when the IPO market shut down more than a month (four of them were in 2008-2009).

These include the period immediately after the Facebook IPO debacle in May, 2011, and the Europe debt crisis in the fall of 2011.

The good news is that once the markets recovered and IPO issuance resumed, IPOs outperformed. During these 11 periods, the S&P 500 was up 4 percent on average in the three months following the IPO market re-opening, according to Renaissance. The IPOs that went public in those three-month periods were up 24 percent on average. That is a significant outperformance.

Should the IPO market reopen, will we see a flood of dozens of companies all at once? Not necessarily, at least not initially. If we go by historic standards, it's likely there will be roughly 20 or so IPOs in the next three months, Renaissance's Kathleen Smith tells me.

Programming note: Smith will join me on "Squawk on the Street" this morning at 10:30 a.m. ET.

So who will be first? There are more than 126 companies that have already filed an S-1, the initial registration form required by the SEC that contains relevant financial information. There's another 100 that have filed confidentially (the S-1 is not yet public) and could go public within two to three weeks of revealing their S-1.

That's a lot of companies!

So which ones might come through in the next few months? Investors will be looking for relatively safe bets. No moonshots, and no profitless wonders. Companies with lots of debt — think leveraged buyouts (LBOs) — will also be scrutinized carefully.

Instead, look for companies with modest growth in a slow-growth economy, solid business models that are likely to be profitable.

Here's a few companies that are good candidates. Not all of them have filed an S-1, so some of these numbers are estimates used by Renaissance.

1) On the consumer side, look at SoulCycle, the indoor cycling fitness chain. It has $150 million in sales and is growing 50 percent a year. Highly profitable.

2) In health care, check out Tactile Systems (TCMD), which makes at-home compression therapy devices for vascular swelling. It's small (only $60 million in sales), but growing 30 percent a year.

3) In technology, there's Acacia Communications (ACIA), which makes optical networking equipment, with $212 million in sales and 80-percent revenue growth a year. It's also highly profitable.

4) In financials, equities and options exchange operator BATS Global Markets (BATS). The company is profitable and growing fast, with $1.8 billion in sales. Its peer group (NASDAQ, ICE) is performing well, and there is lots of interest in consolidation in the stock exchange space.

What about the unicorns, those with market capitalizations over $1 billion? There are more than 100 of them, most of which haven't even filed for an IPO.

There has been intense interest in data analytics platform Palantir Technologies.It's a good candidate: $1.8 billion in sales, likely highly profitable, $20 billion private valuation. But it's not clear if the somewhat secretive company really wants to go public

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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