How to trade IPO's | stockbee

7/19/2007

How to trade IPO's

TBSI up 500% in one year

25% of the stocks in Double Trouble universe have IPOed in last 2 years. Trading IPO's can be profitable for variety of reason. As the universe of stocks to watch in IPO is small, it is easier to catch such IPO's. There are 3 traders I know, who only trade IPO's. By specializing on a narrow segment of the market they get in to all good IPO moves.

Recently I had lunch with one such trader, she had 90% return last year trading only IPO's. There is another trader who specializes in trading IPO's and is regular reader of the blog. From time to time he keeps sending me detailed analysis on IPO's and which one are likely to move. After chatting with these IPO specialist I have learned a lot on trading IPO's and has incorporated their learnings in to trading. One of them has requested me to incorporate IPO as subsection in Opportunity Buffet and which I will do in a day or two.

So what works in IPO's according to these veterans and my experience:

1 IPO's with good earnings or sales growth. This is number one criteria to look for. If an IPO has good IBD ratings I pay special attention to it.
2 IPO underwritten by Goldman Sachs, Morgan Stanley, Merrill Lynch or Credit Suisse
3 IPO's which IPO during market weakness. They really do well. Because unless the company is really solid, who would buy during market weakness. e./g. companies like Coach, it IPOed in the darkest period and went on to great height.
4 IPO's which do not go down more than 35% below first day trading close
5 IPO's with spin offs

The best way to trade IPO is by just running a simple 4% plus breakout scans.
(100*(c-c1)/c1)>=4 and v>=1000 and v>v1
Generally breakout on IPO's have follow through.

The IPO's which do not do well in first year become part of my Virgins strategy.

IPO's in last 2 years up over 100% or more from low price.


AATI ACOR AFSI AHD AIXG AMSF ASTI AZC BGH BIDU BJGP BMTI CAF CBEY CBLI CE CF CHAP CHTP CPA CROX CYNO DCP DK DRC DRYS DSX EDU EGI EMS EPHC ESCH ESEA ETQ EVEP EXPE FCSX FREE FRG FSLR
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FTK FWLT GFA GMO GNK GPOR GTLS HAYN HEM HOKU HPGP HRZ HURN ICE ICOP IESC JASO JCG JRJC KALU KOP KSW LBTYK LEAP LOOP LORL LQDT MA MAIL MDVN MEA MEND MHJ MKTX MPWR MTL NCTY NLN NM NTLS
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OMPI OMRI OMTR ORBC PED PTI QMAR RBY RNIN ROLL RRST RVBD RVEP RZ SGXP SIMO SNCR SPWR SVLF SXC SXCI TBSI TLEO TLVT TRAK TSL UAUA ULTR VCC VLCM VNUS VOCS VOLC VRGY WHT WINN WNR WRSP XNPT XRA
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Several of these are up many, many fold.

6 comments:

Neal said...

Are there any good websites you would suggest for tracking IPOs and when their IPO dates?

Pradeep Bonde said...

www.ipohome.com

hector said...

Thanks for the post and this approach to investing makes a lot of sense because if the company is new, making good earnings, mutual funds and big institutions will buy and load up to participate in the growth

Pradeep Bonde said...

The only problem is it works both ways. Small disappointment and IPOes will gap down. So one has to be very nimble to trade these. They are more volatile. But if one times trade with catalyst, one can make lots of money.

Art said...

It's over two years old but EQIX Quarterly draw a line strait across from the closing candle of 1/15/02. Looks like a nice continuation is imminent.

walter said...
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