What is the best way to execute a buy or buys and get in at a low price
and not have all your money tied up in case the stock doesn't do what
everyone thinks it will... Let's look at Visa's counterpart Mastercard:
MasterCard first day close: $46
Down to $44 within the first 5 days of trading.
Stayed below $46 for most of the first two months.
As you see there would have been opportunity to buy and still make a lot
of money. This is relatively true of most IPOs. Everyone wants to get
in so they buy at the open and then the profit takers take their profits
and sink the stock a little, sometimes a lot.
So the intent of a buying strategy is to ensure you obtain some shares
in case there is no pull back but hedge against a pull back and limit
the loss if the pull back is wide. If the stock doesn't go down and you
buy more over the first several weeks the problem is your cost basis
rises, but you still own Visa and it's better to buy up then down. If
it does go down and you buy over the first several weeks your cost basis
goes down. Either way you are ensuring yourself a chance to get in on
Visa and ride the long term investment.
My strategy is evolving; I am currently taking a thirds approach, I will
place an order to buy 1/3 of my investment at my comfort price and then
watch for a pull-back, possibly take some profits if I can time it right
then buy another 1/3 or 2/3 plus profits. Finally if there aren't any
more indicators of a pullback I'll pull the trigger on the last 1/3...
Geeky sounding but it should work...
If you are able to buy at your comfort price on the opening day do so
but for those that can't there should be time to get in at the same if
not slightly lower price as the open.
Anyone else have a strategy for buying IPOs let us know!
No comments:
Post a Comment