Risk vs. reward

A trio of small Massachusetts companies - Starent Networks Corp., Insulet Corp., and EnerNOC Inc. - has at least two things in common.

For one, all of those companies went public within the last five months and received enthusiastic welcomes from investors. The other thing: Each company is back in the market preparing to sell more stock right now.

These developments illustrate a few things. Most interestingly, they show just how hard investors are chasing growth opportunities today. You can see it in the spiking stock prices of smaller, growth-oriented companies and even in the shares of big companies with engaging growth stories. Emerging markets around the world are booming for the same reasons.

Market watchers have been waiting for the pendulum to finally swing back in favor of growth stocks, and that appears to be the case now. But momentum investors have added fuel to particular stocks, industries, and even parts of the world to push some prices dramatically higher.

Of course, those opportunities involve risk. A long list of potential threats could bump those growth stories off their rails and send stocks down hard. So far, no problem. But the market's appetite for risk clearly did not evaporate when fixed-income markets blew up over the summer.

Risk is fine, if you're getting paid enough to take it. Investors who bought fixed-income securities tied to the subprime mortgage market certainly weren't. Others buying the hottest growth stocks today may be crossing a risk-reward line, too.

Back to those three companies in Massachusetts: Each has soaring stock and occupies a niche in a popular industry. Starent Networks of Tewksbury, which makes multimedia networking equipment for mobile phones, has spiked 106 percent. Insulet of Bedford, which makes insulin infusion systems, has climbed 68 percent. EnerNOC of Boston, which makes products to help manage electricity supplies, is up 71 percent.

Those three companies raised $382 million combined in their IPOs just months ago. New stock sales planned by the same companies would raise another $506 million, based on current share prices.

Perhaps all three of these stocks will turn out to be bargains at today's prices, but each company has a long way to go to prove it (Insulet, which has a market value of $657 million, reported revenue of $3.2 million in its more recent quarter).

But companies go back to the market and raise more money shortly after IPOs because they can, because the money is available, and relatively cheap to them. It's too good to pass up. What does that say about the wisdom of being on the other side of that transaction?

Just in Massachusetts, there are other companies that went public very recently and surely are looking at the same possibilities today. Shares of BladeLogic Inc. of Waltham, a data center software company, climbed 80 percent since an IPO in July. Athenahealth Inc. of Watertown, which sells business services to doctors, went public last month, and the company's stock has advanced 116 percent.

There is plenty of good news to support stocks in general and the shares of growth companies in particular. The Federal Reserve's latest rate cut boosted markets by more than 1 percent yesterday. The world's economies, as a group, are remarkably robust.

But there are plenty of risks, too, from the shaky US housing market to the dizzying climb of Chinese stocks. Sky-high oil prices haven't slowed anyone down yet, but they will at some price.

Growth investors should remember the lessons of the summer's fixed-income fiasco and ask the two important questions. Do you know the risk, and are you getting paid to take it?

BOSTON CAPITAL BLOG Steven Syre is a Globe columnist. Read his daily blog at boston.com/business. He can be reached at syre@globe.com.

Correction: Because of a reporting error, Thursday's Boston Capital column about upcoming stock offerings incorrectly described the offerings by three companies. Offerings of EnerNOC Inc. and Starent Networks Corp. stock include some shares sold or to be sold by major investors and other insiders. An offering of 4.1 million Insulet Corp. shares includes only stock sold by insiders.