Among the biggest winners in Wednesday’s early trading are Guidewire Software (Nasdaq: GWRE) and Orexigen Therapeutics (Nasdaq: OREX).

While the 2012 IPO market will always be remembered for the busted offering by Facebook (Nasdaq: FB), the year has also brought a number of high-quality companies into the public spotlight, and investors have been able to make a killing in the right names. Last week, I mentioned the solid quarterly results offered up by “Big Data” player Splunk (NYSE: SPLK), and you can add Guidewire Software to the list of stellar 2012 IPOs. The provider of insurance agency software turned an expected quarterly loss into a solid quarterly profit — for the third straight quarter — when results were released Tuesday evening.  A $0.10-a-share profit was well ahead of the consensus forecasts of a $0.02 loss. 

Guidewire has been around for more than a decade, but has only recently gained major traction against incumbent vendors such as Accenture (NYSE: CAN) and Computer Sciences Corp. (NYSE: CSC). That traction is translating into 20% to 30% top-line growth, and sales are likely to approach $300 million in fiscal (July) 2013. The total market opportunity is far larger than that, and for Guidewire to boost market share to the levels seen by those bigger rivals, it will need to crack some major accounts. Recent contract wins with Columbus, Ohio-based Nationwide and Aviva, the largest insurer in the U.K., are surely good signs. Indeed, international expansion appears to be a solid long-term growth driver for the company.

To be sure, this is now a story stock: The current run rate of around $40 million in annualized EBITDA is just a fraction of the company’s current $2 billion market value. Even if EBITDA hits $200 million by 2015, then this is still a richly-valued stock. So the key is to wait for the inevitable market pullback, as expensive stocks like this can sometimes take a pounding, which could then create a great entry point.

The obesity cure awaits
Investors continue to closely track any companies that are working on a weight-loss pill, simply because the potential market opportunity is so huge. So investors are bidding up shares of Orexigen by nearly 5% in today’s trading, solely due to a widely-expected announcement that a current clinical trial will be fully enrolled by the end of this year. Investors likely take note of the fact that rival Vivus (Nasdaq: VVUS) saw its share price double in late February when its obesity drug received Food and Drug Administration approval. Arena Pharmaceuticals (Nasdaq: ARNA) has soared to a recent $9.30, from $2 in late April, on the back of an FDA thumbs-up as well. (In case you are wondering, Vivus’ drug is said to be more effective but has more side effects). 

Will Orexigen be next? Merrill Lynch’s Steve Byrne anticipates that the company’s Contrave weight loss drug will get the FDA nod and be on the market by 2014, which underpins his $10 price target. That implies 100% upside. However, the FDA in recent years has increasingly sought to approve drugs that are clearly superior to existing approved drugs, so it’s unclear whether Orexigen’s Contrave will need to clear a higher hurdle than Vivus’ Belviq and Arena’s Qsymia drugs. 

As with many biotechs, Orexigen’s share price outlook is binary: Approval would be a solid boost for this stock, but there’s also ample downside if the FDA gives the thumbs down. 

Action to Take –> Guidewire Software has delivered three very impressive quarters in a row since its January 2012 IPO. The key for investors is to wait for a less-than-stellar quarter, if it comes, as that could be the point to tap into the bright long-term opportunity that will still likely remain on track.

Orexigen’s clinical progress is notable as the company edges closer to the finish line. Yet even if you choose to commit some funds to this stock, then its speculative nature calls for a fairly small-sized position in your portfolio.