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Welcome to Profit Confidential • Tuesday, May 22, 2012

It’s a Great Year for IPOs

Wednesday, November 16th, 2005
By George Leong, B.Comm. for Profit Confidential

The Initial Public Offering (IPO) market in 2005 could turn out to be the second strongest in terms of new issues since 2001. To date in 2005, there have been 165 IPOs, down from 216 in 2004, but well above what we saw from 2001 to 2003. Google Inc. (NASDAQ/GOOG) has been a big winner in the IPO market, and it continues to appreciate. You could have bought the stock for $95 on its first day of trading on August 19, 2004. The stock is now trading at close to $400, up 315% in just over a year.

 Over the last 12 months, one of the hottest IPOs has been China- based Baidu.com Inc. (NASDAQ/BIDU), a leading Chinese Internet search engine, which soared 269% on its first day of trading in early August. Baidu.com is down over 50% from its high of $153.98 and down from its IPO price, but for those who were able to trade the stock, getting in at the IPO price was clearly a big win.

 Just last Wednesday, we saw the much-anticipated robot maker iRobot Corp. (IRBT) move up over 50% from its IPO price of $24, and investors are expecting more.

 For those who want to profit from such trades, the problem continues to be getting in on the ground floor on a major IPO — buying the IPO before it opens for trading. This will continue to be a problem for the majority of stock traders, unless you have a connection inside Wall Street. In other words, if you are a top client generating huge commissions for Wall Street brokers, you might have a chance.

 That said, there are still ways to win big for the rest of us.

 You can still buy an IPO stock on the first day if an issue is hot and turn a great profit. Just keep in mind that once the stock has accelerated, you may want to lock in some profits or at least set a stop-loss to protect the downside. The key is to watch the momentum and trading volume on upticks. You want to see rising momentum as a stock accelerates higher. If volume declines, this should be a warning flag to perhaps jump ship or set a stop-loss. The key is to not get too greedy.

 The big IPO due out this week is athletic clothing maker Under Armour (NASDAQ/UARM), debuting between $7.50 and $9.50, and the investment world expects to see a lot of action here.

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Profit Confidential AuthorGeorge is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.

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