Response to Pre-Market IPO Trade Comment

When VISA begins trading on the secondary market, can it be traded on that day in the PRE-MARKET extended hours (i.e. 8am ET) or will it debut it's first time at the 9:30am ET bell?


Depending on the brokerage... TDAmeritrade allowed me to get in on VMW a few minutes before the pre-market opened. I had to keep submitting my order until it took.

Additionally E-trade has an IPO option that will allow qualified people to get in on the original IPO as shares are spread out to brokerage houses. With the number of shares available there should be some to go around. The defenition of qualified is not entirely clear based on other user's experience. It is supposed to determine if someone is suited to make such speculative investments.

Why XTO ?

More than just because Cramer said so...

A true growth enterprise

Targeting 20% production growth in 2008

A top-ranking owner and producer of domestic natural gas

Fourth largest owner of domestic gas reserves among the independents
Currently producing more than 1.671 Bcfe/d of gas per day
'Top-10' natural gas producer in the U.S.

Highly efficient franchise

One of the lowest 'finding & development' costs in the sector
Five-year all-in reserve replacement of 518%
Strong operating margins yielding strong full-cycle economics

Tremendous upsides

Have identified 7.3 Tcfe of low-risk resource potential to drill
About 5 years of low-risk growth inventory 'in hand'

Low-risk, high-return strategy

Acquire the best 'legacy' properties
Apply rigorous engineering and geologic work, along with pioneering
innovation
Prove-up and develop more reserves and production
Seek project economic returns better than 30%

Financial performance

FirstCall consensus projection of more than $3.8 billion in cash flow
for 2008
Significant oil & gas hedges through 2008

Stock price performance

Appreciation of 5744% from 1993 IPO through January 2008
The IPO stock price of $13 has increased to more than $759 through
January 2008
(when not adjusted for stock splits)

Proven management

Company founder actively manages company
Senior executives together 25+ years
Management owns more than 6% of XTO stock

Beginning Investment Question-Visa IPO

I recently had a question regarding what brokerage to use to get in on
perhaps the Visa IPO and to begin learning short-term trading.

I would recommend zecco.com for a first-time-trader, you get up to 10
commision free trades/month and decent tools. I would recommend playing
on paper first. Pick a few companies you know, things you buy, etc and
put them on a spreadsheet with a notional pool of money and track a
small portfolio. This usually leads to questions of why did X do well
and Y do poorly, when I thought Y was a safe bet and X was risky? For
me this is the best way to learn as it prompts more research which is
key to successful investing.

If you are going to try and buy Visa, a strategy is to open up a limit
order pre-market open, depending on pricing from the 19th and start with
a set amount then buy up if the outcome is positive and strong.
Example, purchase 25K the day it opens then add to that at intervals
until I hit my 50K mark. Then set another limit order to sell at
pre-determine prices. Lot's of jargin there I know but essentialy I am
putting in what I feel comfortable taking a hit on then if it does well
will continue to buy over time limiting my risk exposure.

Limits are essentially a way to place an order to buy or sell when the
stock hits a certain price, and only at that price. Example I buy 100
shares of XYZ by placing a limit order of 100 shares @ $10 when the
stock hit's $10 dollars my order is automatically executed. I set
another limit order to sell 100 shares of XYZ at $8. that way if the
stock does poorly I only take a 20% hit, this is how you control your
risk of loss. Also, I can also set another order (on more advanced
trading systems) to trigger a sell, say, 100 shares of XYZ at $20 and
take all my initial capitol out plus a 100% profit. The latter example
is called a trade trigger on Ameritrade. Then you have the stop-limit
as well, which is simmilar but the order becomes a market order at your
limit price which means you could pay more or less than you anticipated.

Good definition here: http://www.sec.gov/answers/limit.htm

So my bottom line recommendation for those wanting to invest in stocks
is to start with some Electronically Traded Funds (ETFs), similar to
mutual funds but with more trading felixibility. This way your risk and
volitility is reduced because you get the benefit of broad securities
under one fund. The India ETF just opened, great international, albeit
one country, exposure while having an interest in many companies. There
is a short post on the blog on this one. Others I am in currently in
are PBW, QQQQ and soon to be DIA.

Any good brokerage you choose will have educational information to get
you started in the mechanics but as always, research until you are
comfortable. Things like Volume, PE, PEG, moving averages etc all play
a part in assisting you in making your decision.

More Visa IPO Info

A quick statistic… MasterCard went public at a price-to-earnings ratio of 11. Visa's estimated sale price puts it at around 30. Does this mean that Visa will be limited to 1/3 of MC’s high price? Probably not, maybe on some technical plane but if you pay attention to any of the prime analysts or periodicals PE isn’t everything. Especially with the high momentum and interest in this event already stirred up. Besides statistics can be used to anyone’s advantage, just depends how you play the numbers…

But if we want to look at numbers let's look at credit/debit card usage with the chart below…

I am preparing myself to go all in this time and we’ll see what the river has in store for us…

TDAmeritrade IPO Purchase

I have been asked how to purchase an IPO on TDAmeritrade.  I mentioned the brute force method in an earlier post, set up your limit order and keep hitting the refresh button to see when it executes…  So you can call Ameritrade and set your limit order up the night before…

 

Straight off the website…

 

Can I trade IPOs?

TD AMERITRADE is normally not part of a "selling group", unless otherwise notified, you will not be able to purchase shares of Initial Public Offering (IPO) securities until trading has begun on the secondary market. Once the IPO begins trading on the secondary market, you will be able to place your trade online. If you wish to place a day, limit order on the day before the IPO begins trading on the secondary market, you can do so through a broker by calling 800-669-3900. A broker will ONLY accept these particular orders after the trading session has closed for the current day (4 P.M. ET).

Visa IPO MARCH 19 Open on 20

To start The Visa IPO should price on March 19 and open on March 20.

So I wrote last month about some possible influences that might affect the upcoming Visa IPO. I briefly discussed the potential of the credit crisis effecting the price potential of the IPO. Especially since momementum psychology has MasterCard setting the benchmark price potential for some. Another news story came out today about how far people are getting gehind on their payments and maxing out credit to the tune of trillions of unsecured debt.

First off Neither Visa or Mastercard actaully lend money. They provide the service of which other banks actaully lend the money. The fees charged by these companies makes up a substantial part of their revenue. So people like me and those I know who put everything on their credit card in order to maxmimize points yet pay off at the end of the month really lend to the CC companies making money.

It is also possible, and not the best reason to invest, but as the economy continues its downswing people will be looking at any means possible to buy things and that usually means they turn to credit cards. Remember fee based service, no debt on the balance sheet.

If you look at Visa's latest numbers I beleive this to have major upside potential. Visa said earlier this month that profit doubled to $424 million in the quarter ended Dec. 31. Revenue surged 76 percent to $1.49 billion. These numbers would cause a major surge in stock price in any publicly traded company.

Additionally they plan on putting $3 billion dollars aside to settle lawsuit activity.

Visa IPO to Raise $17 Billion

Feb 25, 8:44 AM EST

Visa filed with the SEC to sell 50% in the company or 406 million stocks
at a price between $37 and $42 per share on the success of MasterCard.

Visa Inc, the largest electronic payment processor, filed with the SEC
to sell 406 million shares at a price between $37 and $42 per share. The
offerig, the largest in the U.S., is likely to raise between $15 and $17
billion. Second largest charge processor, MasterCard, priced its
offering in May of 2006 and raised $2.45 billion at $39 per share, the
stock has since then jumped 400%.

From: http://www.123jump.com/

EPI an Indian ETF

Wisdom Tree’s India earnings fund began trading Friday, ticker EPI…  A great way to get broad coverage into the Indian stock market. Traded just over a million shares. 150 local Indian securities based on earnings primarily because of the trading regulations of India.

XTO Energy

Here it is, now complete, the oil and natural gas producer is priced very cheap right now around 52$.  Of course those of the lucky ones got it at 39$.  We all know the energy situation right now and if you look at industry comparatives this is definitely the time to get in on this company.  Natural gas prices haven’t experienced the same as crude oil, YET…  but research shows it’s coming.  It’s also an alternative energy so it fits right in line with our recent move into alternative energy stocks and ETFs.  Currently XTO is priced about 20-30$ lower than its lateral completion, Anadarko Petroleum, Devon Energy and EOG Resources.

 

Get in on it while you can, or want to!

Another Golden Speculation

Ok, so I have my shares of speculative stock, Amish Naturals I talked
about yesterday now I'll address Pacific Gold (pcfg.ob).

Over the past year the shares have plummeted from .40 to todays .045.
Yes four and half cents. The operations at the Black Rock Canyon mine
are behind schedule and of course this is a speculative, hence highly
volatile stock. But if there is any merit to the company and what
management is saying and doing to actually extract gold and with the
price of gold soaring everyday it is worth the watch and research
whether or not to buy shares.

Management says they should get operations on-line this year and if that
happens you should see the share price brought up by investors.

Watch the news on this one.

Visa IPO Update

Remember what I said earlier about the current economic environment's impact upon the Visa IPO? Looks like their might be some impact coming to light. Read this article from Reuters.com for more information: www.reuters.com/article/newIssuesNews/idUSN2741121220080127. It is not cancelled but possibly put on hold as other CC companies are taken consumer debt losses right now...

Amish Naturals AMNT.OB

I have been quite about this one for a long time, waiting for it's production and distribution to grow. It is now achieiving realistic levels of distribuiton with plan for larger growth of their pasta line in the Mid-atlantic, where many of us Italian types live. Over the past two months the company has been in the news quite a bit. Check out the latest quote and news at http://finance.yahoo.com/q?s=amnt.ob. They had hired a marketer to sell their stock through an payed-for-advertising brochure which made some easy momentum plays, I pocketed a quick couple thousand in a few days off it. But now it looks like it could have a decent future as a long holding. Might not be a bad time to get in under 2$. Volume has been heavier than usual, hopefully based on the news and not another marketing scheme.

Volume is a critical factor in Over the Counter stock trades. Without a lot of buyers and sellers, it's hard to make large plays in a timely manner.

Is the Dow 30 really cheap

DIA the ETF that tracks the Dow Jones Industrials top 30 seems to some analyst, pretty cheap right now.   

 

Morningstar wrote that the Dow was trading at a "very hefty" 17% discount to the firm's fair-value estimate of 14,000, which is in turn based on estimates on the index's component 30 stocks. The Dow closed Friday at 12,348.21.

 

The index will have two new players, Bank of American and Chevron, come Tuesday morning while saying good-bye to two others, Atlria and Honeywell.  Altria had much hype over the past year as a great play but I am not an expert on how the Dow 30 is comprised. 

Today's Successes

First Solar:

"Our 2007 results increased our position as the low-cost leader in the industry and brought us closer to achieving price points that make solar electricity viable," without significant government subsidies, First Solar chief executive Mike Ahearn said in a conference call with analysts.

This is a key statement for Solar Energy in general. Obtaining a competitive price point without government subsidy. When manufactures make solar cells at such an affordable rate as to not require govt intervention or 5+ years to recoup your investment it will be much more widely accepted. And that will lead to much higher stock prices if companies can keep production in line with demand.

By the way with all the hype of Solar being a China Play remember First Solar is out of Phoenix, AZ.

Read the rest here: http://biz.yahoo.com/ap/080213/solar_power.html?.v=1

PBW is the ETF I have been recommending, FSLR is one of their top 10 holdings

Baidu.com:

After the bell reported over 70% increase over last year. Up in afterhours trading. Let’s see what this does tomorrow. BIDU has some interesting plans for 2008, one to be competitive with ALibab.com. One warning was announced that mentioned a slow down with the recent bad winter weather experienced in lately. Still one to watch even though IBD 100 dropped it.

If you are looking at getting in on some BIDU action but don’t want to shell out 300/share try our friend the mutual fund/ETF; some funds holding BIDU are:

Fund—Shares—Percentage of holdings—Total

CALAMOS GROWTH FUND 575,000 2.55 $219,931,750 31-Oct-07

MORGAN STANLEY INST FD TR-MID CAP GROWTH PORT 278,096 1.23 $80,550,506 30-Sep-07

VAN KAMPEN MID CAP GROWTH FUND 141,026 .62 $40,848,180 30-Sep-07

Powershares Exhg Traded Fd-Powershares Golden Dragon Halter 131,447 .58 $50,277,163 31-Oct-07

Oberweis China Opportunities Fund 131,300 .58 $38,031,045 30-Sep-07

PACIFIC SELECT FUND-MID-CAP GROWTH PORTFOLIO 126,770 .56 $36,718,930 30-Sep-07

Allianz Fds-RCM Technology Fd 112,500 .50 $32,585,625 30-Sep-07

Van Kampen Strategic Growth Fd 100,000 .44 $20,820,000 31-Aug-07

VAN KAMPEN AGGRESSIVE GROWTH FUND 96,045 .43 $27,819,434 30-Sep-07

Legg Mason Partners Small Cap Growth Fd 91,500 .41 $26,502,975 30-Sep-07

Some new plays in todays market

Short funds are doing very well right now as expected in a market correction.  I still suggest repositioning what you can and accumulate cash over the next several months to be prepared for the turn-around or some significant events that are up and coming.  For quick trading with a high savings interest rate look at Etrade. 

 

Eastern Europe and Brazil should do well despite all the market correction activity in the U.S. and whatever other economic problems we have right now.  I suggest a good mutual fund that covers broad sectors in these two emerging markets.

Back to the basics

I have been asked what is the easiest thing I can do to start investing... My easiest answer is to find a low fee good return history index fund some of which can be found here:

 

http://money.cnn.com/magazines/moneymag/bestfunds/2008/indexfunds.html

 

Open an account at your company of choice and get on their monthly automatic investing plan.  Some of these are returning 13% over the last five-years...

 

More to come...