No. 1: Overpaying Overpaying for a company's IPO is a common mistake that many investors make. Investment bankers often hype IPOs and quote overly high valuations for shares. This frequently leads investors to overpay. But you shouldn't treat a company's IPO valuation differently from that of a company that's already listed on an exchange. For example, you should be looking at how the company's business is doing, whether it's profitable, and whether it's growing revenues and earnings. Many investors are attracted to IPOs because they think they'll make quick profits. But that way of thinking is for speculators. Many IPO shares will retreat after the initial euphoria of the offering has passed. You should always treat an IPO investment as a long-term play - just like you would treat any regular stock. Ask yourself whether this company is worth investing in at this price and what its shares are going to be worth in five or 10 years. No. 2: Being Underinformed Another mistake that investors make when investing in IPOs is not doing enough research. Often, the only information available is in a company's prospectus. However, investors can glean useful information about the company and its future prospects by looking at the company's website. The more information you can find, the better. I've even called the investor relations departments of companies that I'm interested in. If you're persistent, you can often get information not available anywhere else. No. 3: Miscalculating the Market Finally, pay attention to general market sentiment. Whenever markets are moving toward euphoria, plenty of companies issue IPOs to generate capital. However, you need to be careful. Those conditions can sometimes foretell a coming market correction. Just look at how many companies have already gone public this year. I'm not suggesting that a market correction is imminent. Interest rates are low, and there's a lot of capital flowing into the market. But the bottom line is this: Always look beyond an IPO's initial listing gains. Think long term, and do your due diligence. Don't be a speculator and buy shares on the first day. You'll likely overpay if you do. Good investing, Dave P.S. Great tech stocks can enable people to walk away from their jobs and lock in early retirements. Take Jason D., for example... He began buying Tesla (Nasdaq: TSLA) at $7.50 in 2013. Now, at 39 years old, he is retiring with a $12 million position! And I think I've found what could be the next great tech stock that may help you secure an early retirement... Click here for more information. | 
No comments:
Post a Comment
Keep a civil tongue.