IPOs for the rest of us

Today I received a great question, one which prompts me to elaborate on trying to get the lowest price possible the day an IPO hit’s the street for public trading.

Here is a great article on how IPOs work based on the ever famous Google IPO, although GOOG was supposed to be available to the "average investor" lots of good info here:
http://www.signonsandiego.com/uniontrib/20040812/news_1b12google.html

The primary factor here is that unless you have a large account (read most likely millions, I have heard of some getting in with reasonable accounts in the six-figures) with one of the underwriters or brokerage houses directly involved with the IPO. So unless someone has any way the rest of us can get in on an IPO at the IPO price this is how I have done it in the past.

I use TDAmeritrade for my active trading and Sharebuilder for my more dedicated long term buys, neither are participants in IPOs.

To get a low price you need to get in early, however the ticker is not available to trade on normal trading accounts until the day of the IPO.

TDAmeritrade will actually accept orders a few minutes early on “opening day.” If you try the looking up the ticker on Ameritrade it will not show until 10-20 minutes prior to the open. So I set my limit order to what I am willing to purchase and keep submitting until the system identifies the ticker and accepts the order.

Now, I have been successful this way, most recently on the VMW IPO which I got in on opening day at 51, much higher than the 28 others got but still below the 120+ it hit. Although in an attempt to not be greedy or emotional I sold before that 120+ moment. However, the possibility still exists that using a plain-jane limit order might prevent you from filling your order if you are setting stops or instructions of All or None, etc…

I figured this out from some research which pointed me to the 15-20 minutes early on Ameritrade to realizing that the trading house wouldn’t quote the new ticker until then preventing me from setting a limit order the night before like I would usually do.

RENESOLA IPO Opens Today!

NEW YORK, Jan 29 (Reuters) - Chinese solar wafer maker ReneSola Ltd (SOLA.L: Quote, Profile, Research) said on Tuesday that it priced the initial public offering of its 10 million American Depositary Shares (ADSs) at $13.00 per share.

Each ADS represents two ordinary shares of the company. They will start trading on the New York Stock Exchange on Jan. 29 under the ticker symbol "SOL", it said.

Visa IPO, what else...

So what advice do I have today... Well, not much. So let's talk about the upcoming Visa IPO. It is scheduled to happen sometime within the next 12-months, plenty of time to shift resources around to get ready to buy the day it opens. First, how do you do this, for those of us who are mortals I like to place a limit order at which I am willing to buy and keep hitting the order button until it is accepted at the earliest possible time. This works with TDAmeritrade since they let you submit right before the bell. This is how I got in on VMW at 51. (Just a word to the wise, Wall Street can be brutal, if you saw, VMW dropped 22 after the bell today since it's forecast isn't what WS wanted to hear) So, store your cash and subscribe to my blog as I will be posting more on when some of my favorite IPO's are supposed to happen.

Back to Visa, my concern here is the current economy and the credit problems already encountered. If the consumer doesn't gain confidence on spending or more banks are forced to write off bad credit the potential for Visa to not do as well as expected is there. What is the issue you might ask? Well, again for us mortals who won't be getting in at the opening price we should be a little more conservative in what we are willing to pay. Otherwise expect some good near-term profits to be had.

Currently Visa's lead underwriters include JPMorgan and Goldman Sachs. GS had an outstanding year despite all the economic turmoil. You can visit the SEC website to obtain the prospectus.

Automated Investing

Automated investing is one of the easiest, best ways to start an investing program. If the money goes directly to the investment before your pocket you are much more inclined to continue and realize that you don't necessarily miss it each month.

Sharebuilder and ETFs, Control, flexibility and discipline. I am starting to use automatic investing in PBW and QQQQ through sharebuilder. This is cheaper than commission through my on-line broker and happens automatically. Both of these ETFs contain most of the companies I discuss and with the current economic situtation should be a good place to open with a sizeable chunk of change and then continue to contribute over the long run. Plus they are ETFs so I have the ability to sell on the open market in the wake of news and research instead of waiting for someone to compute the NAV the following day after the news has had a chance to affect the fund price.

Another good recommended automated investment is MCD DRIP program MCDirect, of course, info here: http://www.mcdonalds.com/corp/invest/mcdirect_shares_prospectus.html. A great dividend payout from them is one reason that makes them a strong holding in the portfolio.

Can't make up its mind

That goes for everyone. How is it that we believe Wall Street has a mind of its own and that it must be satisified in order to bring the economy back to pre-recession days. If a child were to act this emotional they would be looked at like a spoiled brat throwing temper tamprums. How is lowering the interst by by 3/4 points going to help the average american begin making more purchases off-credit when they still live in fear of losing their home, paying for healthcare and trying to keep their gas tank full? It can't as proven by today's U.S. futures and the European indexes. Although the Heng Seng rose over 2000 points that was b/c it hasn't had a chance to react to the Fed decision and the recent earnings report.

So what does this mean, I think IMHO it means to start holding on to some cash and get smart on some of this years potential profit makers. The Visa IPO is scheduled for this year. This needs to be watched as the number of late payments across 30, 60 and 90 days increases. Then there are some tech stocks of some companies that I grew up with, namely the following

MySQL - Widely used open-source database.
Ingres - Currently profitable looking at a mid-year IPO
SugarCRM - Again profitable
ExactTarget Profitable
Parallels – Server virtualization software and a VMW Competitor targeting the Small and Medium Business

So my strategy is to close some positions and place that money into a high-yield savings account. This money will be marked for taking advantage of one or more of these IPO's.

Additonally I am beefing up my PBW ETF holdings in my belief in the need for alternative energies and to keep a look at companies that may profit from the "green-jobs" being touted by the current Presidential candidates.

Remeber don't by a stock on the way down. Look for the indicators that show a greater probability of floors being hit and buy the rebound. IBD top 100 is a good start.

What to do starts with what you believe

Being a member of the greedy croud, I have lost my share of money and unrealized profits. I have slowly broke out of this cycle by focusing on fundamentals and technical investing methods instead of emotions and chasing the doublers and triplers.

So the dilema of today's news is challenging. Dow futures suggest a 500-point drop today let alone the major drops in the overseas markets. I have been cotemplating in taking a slight loss or break even and sit on cash until the market changes or one of my research interests proves to have some potential. I could stick my cash in a high-yield savings account and be guaranteed some extra money without extra work or continue to work and stress over what to do next.

I could quote the bible all day on the "evils of money" but this one says it best for my intent of this blog, from Eclessiastes 5 (NLT):

Hoarding riches harms the saver. 14 Money is put into risky investments that turn sour, and everything is lost. In the end, there is nothing left to pass on to one’s children. 15 We all come to the end of our lives as naked and empty-handed as on the day we were born. We can’t take our riches with us.

So my point of this blog is to give to those in need despite the reason for their need and be happy doing so. My belief this idea would be greatly assisted if I was financially self-sustaining or independent seems to be in question. If I continue losing money in the market how am I helping anybody or achieving my goals. Sure I have automatic debits going to worldwide organizations but how much am I holding back because I need to keep fueling my retirement plan.

Two things to take away from this is do what is right and responsible to take care of your family and don't worry about how much you have in the future when you should be using it now...

U.S. Markets Closed But...

Today the U.S. markets are closed for Martin Luther King day. So what's the problem?

HANG SENG -1,383.01 -5.49% 23,818.86
NIKKEI 225 -535.35 -3.86% 13,325.94

Well, the rest of the world isn't closed today and unfortunately they don't believe the economic stimulus package Busch is propsoing is enough and will be coming to late to convince the U.S. buyers to start buying stuff again. Once again, that word recession is back on top of most investors conversations.

So the global economy is reacting to the U.S. economy woes. I guess I would have to agree, take the average U.S. person who is stuck owning a home that is worth less than they owe, fears of a recession and possible loss of jobs and try convincing them to spend their money on stuff they don't need. How much stress is on someone who fears losing their home or job? Although, I believe in personal responsibility what we as a country allowed to happen, outside investors, "free" credit, no-interes hype and ARMS for all is not good responsibility of a country.

So how do you fix that and at the same time, battle rising health-care costs, a failing home-market, fight a war and thwart the next terrorist event? I don't have an answer, nor do I think there is one outside of forgiving all the negative home-equity that people have accumulated during this correction period as a merciful outpouring of gernerosity. After all the banks are writing off billions, why not just forgive the debt over the market value of the homes and reset the loans, you still write off billions, less billions, but you also help the economy at the same time and still have a chance of recouping 70 to 90% of the loan values. This would be considered mercy that we all have been given and those that have homes and make the payments and aren't worried about losing theirs should understand this and be happy for what you have.

Anyway, I thank God for my home and job and will try to manage my finances as anyone shown this kind of mercy should.

Better Uranium Enrichment

Sounds like a news excerpt but I was researching alternative energy sources, which nuclear power is part of, and came across this issue brief from http://www.uic.com.au/nip33.htm

Timing was spot on as this proof-of-concept is to be complete by the end of 2008...

The only remaining laser process on the world stage is SILEX, an Australian development which is molecular and utilises UF6. In 1996 USEC secured the rights to evaluate and develop SILEX for uranium but relinquished these in 2003. (SILEX is also useable for silicon and other stable isotopes.)
In 2006 GE Energy entered a partnership to develop the SILEX process. It provided for GE (now GE-Hitachi) to construct in the USA an engineering-scale test loop (by end of 2008) then a pilot plant or lead cascade, which could be operating by 2010-12, and expanded to a full commercial plant. Apart from US$ 20 million upfront and subsequent payments, the license agreement will yield 7-12% royalties, the precise amount depending on how low the cost of deploying the commercial technology. GE referred to SILEX, which it has re-badged as Global Laser Enrichment (GLE), as "game-changing technology" with a "very high likelihood" of success. In August 2007 Silex confirmed that GE-Hitachi planned "to complete the test loop program at the end of 2008, which if successful, would open the way for the first commercial enrichment plant to be constructed."
In October 2007 the two largest US nuclear utilities, Exelon and Entergy, signed letters of intent to contract for uranium enrichment services from GEH. The utilities may also provide GEH with facility licensing and public acceptance support if needed for development of a commercial-scale GLE plant, for which the NRC expects an application in FY08. GEH has begun preparing a GLE test loop at Global Nuclear Fuel's Wilmington, North Carolina fuel fabrication facility - GNF is a partnership of GE, Toshiba, and Hitachi. Before moving ahead with full-scale production plans, GEH will first evaluate results of the testing, select a location for the proposed commercial plant and obtain a license to build and operate it. Site selection and commercial licensing are now under way with a view to start-up date of 2012, with capacity of 3.5 to 6 million separative work units (SWU).

What's new for 2008

Has it been a fun year? Obiously the questions are about what to do with your money now. Still believing in the alternative energy sector, I have been buying PBW lately, an ETF that covers most of the talked about alternative energy investments. Since it is an ETF it has wethered the storm better than say putting most of your money in FSLR. Although FSLR should recover when things starting getting better. Right now things are at a discount. As usuall press reports cause investers to sell and many companies are undervalued again. Such as BIDU, RIMM, AAPL, etc. SOLF is something to watch as well as the expected Visa IPO due this year. Keeping cash on hand sees to be the difficult part. Staying out of stocks that were bought without technical guidance. If you are a stochostics type, many stocks are at there bottom as well as below, near or at their 50-day moving average. Will the economic stimulous package help, we'll see but if it does and you feel like taking a risk, there will be some quick momentum when it happens and some quick profits if you limit your profits and don't get greedy.

PBW top 10 holdings:

AMSC Jan 18 18.31 0.64 3.38% 1,427,646 Chart, Messages, Key Stats, More

EMKR Jan 18 10.64 0.09 0.85%1,218,003 Chart, Messages, Key Stats, More

ESLR Jan 18 11.82 0.27 2.23% 5,789,335 Chart, Messages, Key Stats, More

FSLR Jan 18 175.88 8.68 5.19% 8,641,881 Chart, Messages, Key Stats, More

JASO Jan 18 56.30 0.24 0.43% 3,958,884 Chart, Messages, Key Stats, More

WFR Jan 18 65.83 2.75 4.36% 8,487,685 Chart, Messages, Key Stats, More

ORA Jan 18 42.79 1.71 3.84% 309,506 Chart, Messages, Key Stats, More

SPWR Jan 18 74.75 6.21 7.67% 6,925,097 Chart, Messages, Key Stats, More

STP Jan 18 56.96 1.97 3.58% 5,695,885 Chart, Messages, Key Stats, More

ZOLT Jan 18 34.89 1.41 4.21% 1,342,970 Chart, Messages, Key Stats, More