IPOs for Financial Fashionistas

If gold can become a fashionable investment again, then there's hope for anything -- including the IPO market.

And while gold lame may bring back fond (ha ha) memories of the 1980s, the mere mention of the term IPO whisks us right back to the roller-coaster ride of the late 1990s.

But things are different this time around. For starters, the only wearable metallic item I will purchase this fall will be a belt. Fortunately for all of us, the current IPO market is showing similar good taste.

Aside from Baidu.com's (BIDU) 239% first-day pop on Aug. 5, the average IPO is climbing around 11% on the first day, according to IPOhome.com. "So it's a much more rational place to be right now," says Kathy Smith, principal at Renaissance Capital.

Clearly, we're not seeing an endless stream of profitless dot-coms going public. More seemingly stable sectors, such as health care and energy, are doing more of the offerings -- and doing quite well too. Of the 23 health care IPOs thus far this year, the average return has been around 15%, according to IPOhome.com. And the energy sector's 10 IPOs have averaged a whopping 24% return.

For example, Threshold Pharmaceuticals , a biotech firm that develops metabolism-based therapeutics for treating tumors, is up about 42% since its Feb. 4 offer date.

Winners in other sectors include Verifone , a global provider of electronic payment point-of-sale systems, which is up 85% from its April 29 IPO.

But for the most part, the pace is not frenetic, and most of these companies actually have earnings even before they hit the exchanges. Does that mean you should be investigating IPOs for your portfolio?

If you can get your hands on the right information, there can be a place for them. But IPOs can be very risky. So let's go through the mechanics of a new offering and then help you determine if these are the right stocks for your portfolio.