Mike
02-03-2012, 05:32 PM
Since I own the IPO KORS I am reviewing possible selling strategies and wanted to get a fresh historical perspective of how institutional quality IPOs act. I also could end up buying Face Book when it comes out.
In CANSLIM investing we do not buy an IPO on the first day. We wait for several weeks for either a real base to form or a short tight consolidation to form of 3 weeks or more. The consolidation should form above the IPO offer price and correct less than 20%. The buy point is the first break above the pattern. GOOG IPO is the quintessential pattern to study. There should what appears to be institutional involvement in the action. This is judged by volume. I would expect to see average volume greater than 1M shares on an IPO trading above $15.
Attached is a list of IPOs that you might want to study.
I removed thinly traded stocks from a larger list. These stocks then should represent the kind of IPOs that attract institutions. Most of the symbols are recognizable.
I would not use these statistics for IPOs trading under a million shares per day or under $15-20. I would consider KORS and maybe Face Book (FB) wwhen it comes out to fit the pattern of these stocks. Remember that many IPOs don't meet the breakout criteria here or are thinly traded.
Buy point in this study is first buyable base, could be a short IPO base or a later base that forms. Many of the buy points are split adjusted and the actual price was much higher on the day of the breakout. For example Disney (DIS) wasn’t trading at two cents in 1957.
Sell point in this study is the first time the price breaches the 50-day. A breach is defined as undercutting the lows by 10 cents of the first daily close below the 50-day after the breakout.
The gain column then is the gain of the initial breakout run until it meets the sell criteria. Many stocks then corrected and formed more bases that could be bought.
It is apparent to me that the breakout statistics of IPOs are different than a breakout of a regular stock from a 1st or 2nd stage base where we tend to take profits at 20-25%. It is apparent that holding on for at least 40% could be a useful strategy if not much higher. A strategy of having sticky fingers until an actual failure of the 50-day might be a useful strategy to consider.
12620
In CANSLIM investing we do not buy an IPO on the first day. We wait for several weeks for either a real base to form or a short tight consolidation to form of 3 weeks or more. The consolidation should form above the IPO offer price and correct less than 20%. The buy point is the first break above the pattern. GOOG IPO is the quintessential pattern to study. There should what appears to be institutional involvement in the action. This is judged by volume. I would expect to see average volume greater than 1M shares on an IPO trading above $15.
Attached is a list of IPOs that you might want to study.
I removed thinly traded stocks from a larger list. These stocks then should represent the kind of IPOs that attract institutions. Most of the symbols are recognizable.
I would not use these statistics for IPOs trading under a million shares per day or under $15-20. I would consider KORS and maybe Face Book (FB) wwhen it comes out to fit the pattern of these stocks. Remember that many IPOs don't meet the breakout criteria here or are thinly traded.
Buy point in this study is first buyable base, could be a short IPO base or a later base that forms. Many of the buy points are split adjusted and the actual price was much higher on the day of the breakout. For example Disney (DIS) wasn’t trading at two cents in 1957.
Sell point in this study is the first time the price breaches the 50-day. A breach is defined as undercutting the lows by 10 cents of the first daily close below the 50-day after the breakout.
The gain column then is the gain of the initial breakout run until it meets the sell criteria. Many stocks then corrected and formed more bases that could be bought.
It is apparent to me that the breakout statistics of IPOs are different than a breakout of a regular stock from a 1st or 2nd stage base where we tend to take profits at 20-25%. It is apparent that holding on for at least 40% could be a useful strategy if not much higher. A strategy of having sticky fingers until an actual failure of the 50-day might be a useful strategy to consider.
12620