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Investing in IPOs

Adam Sarhan
Wed Jun 25, 2014 01:12 EST

People often ask me how to find and own leading stocks? One of my of my tools is to constantly look for new stocks. History shows that some of the greatest rallies in Wall Street history occur in the first few years after a stock's Initial Public Offering (IPO).

Recent Examples

Some recent examples include the following: Starbucks, Microsoft , Apple, Google, Priceline Group, Chipotle Mexican Grill, Under Armour, Tesla Motors, Netflix, and Facebook, just to name a few. All of these stocks have enjoyed breathtaking rallies in the years shortly following their IPOs. On,Tuesday, June 25, I wrote an article titled "Looking For Leaders? Consider These Four New Stocks," which was posted on,Minyanville. Read here.

Shared Characteristics:,Hyper Acceleration & Bases

Before you can find the next "monster" stock, it is important to understand the broader concept of what characteristics most monster stocks share before their explosive moves. The idea is to find and own shares of Starbucks or Chipotle Mexican Grill when they only have a few hundred locations, not after they built an empire of thousands and thousands of stores. Another important trait that monster stocks share is that they breakout from bullish technical patterns. The earliest being a bullish IPO base. These bases come in many different shapes and sizes, but catching these big winners near (or shortly after) an IPO base is a great way to find the next monster stock. Remember that not every monster stock has strong fundamentals or technicals, but most of the biggest ones do.,

Why Companies Go Public?

Another important concept to understand is the logic behind why companies go public. It is important to understand the reason(s) why a company goes public to help you find the next monster stock. Let's start from the beginning. A new company is just formed, and after time passes, it finds itself growing (hopefully, rapidly). One popular way to finance that growth and take the company to the next level is to go public. In practice, the company sells shares to the public and in exchange uses the money to help grow their business (in most cases). Then, after the IPO, the stock is publicly traded, and investors are able to buy shares and own a piece of this growing business.

Then, as the company continues to grow, they begin posting strong sales and earnings growth, quarter after quarter and year after year. This, in turn, attracts many investors who begin buying the stock. As more and more people buy the stock, the shares inevitably increase in value, and it attracts even more investors. This is how a monster stock is born, and it is one reason why astute investors look for new merchandise. Finding the right IPO will help you catch monster stocks nice and early.

If You Want This Done for You, Join Adam Sarhan's Report and Learn How To Make Money & Navigate The Stock Market. Plus Get New Trade Setups and,Advanced Long/Short Signals in Leading Stocks.

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