Tuesday, 19 July 2011

IPOs - reflection

Recently, there are quite a number of IPOs coming up. Malacca trust, kitchen culture holdings, 800 super holdings etc.

When I first started 2 years ago, I thought IPOs was very exciting. Within a day it can rise so much and fall so much. Howver, I didn't dare to buy any of these IPOs as I am scare. After seeing some of the IPOs ran up so high on the first day of trade, I sort of regretted why I didn't participate in them.  (but do note, it is on hindsight.)

Recently, I have a different mindset as I realise something. TA and FA rely on historical data which IPOs lack. TA rely on historial phychological support/resistance while FA looks at the fundamental, numbers, business of the company and whether it show good historical durable comparative advantage.

IPOs do not have much historical data. IPOs do not show how the market perceive the price vs value of the company.

Although IPOs is very exciting, but I think it is not the cup of tea for me.

I still prefer:
money management 10-15% per stock/sector-> current market sentiments (be greedy when other are fearful, be fearful when others are greedy) -> FA screen -> TA good price to enter

(Haha, I am really a science student instead of art student, do things must one step follow by another step.)


Value Investor said...

I don't trust IPOs. IPOs simply means businessman selling off part of their company shares to the public. If their business is doing well, why do they want to sell?

There are good reasons and bad reasons to do that:
1. They perceive that their business had reached a peak and hence they want to take profit on their business.
2. They want expansion and hence they need to raise more cash.

Before you apply IPOs, please do your diligence. As for myself I prefer to stay out.

OT83 said...

Hi Value investor,

I agree. Generally I avoid IPOs.

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