How to Play the IPO Boom

On the day of listing, Yamada shot up to S$0.41 at the highest point and pared down to close at $0.37.

GLP IPO (priced at $1.96), one of Singapore's biggest ever public share floats, has attracted huge interest from small investors, with over $2.2 billion chasing the shares worth $200 million reserved for retail investors (its 11 times over-subscribed!). The red-hot response to the initial public offering (IPO) for Global Logistics Properties (GLP) also means much awaited money to be made for the counter on the Singapore Exchange (SGX) on Monday - 18/10/2010.

Next up, is the Mapletree Industrial Trust IPO (at S$0.93), which is set to raise up to S$1.19 billion in gross proceeds, assuming full overallotment is exercised. It is also planning an IPO of Mapletree Commercial Trust (MCT) early next year.

If that's not all, there are another 2 IPOs that are kinda neglected and brushed aside right now (i wonder why do they want to time their IPOs to clash with the other 2 prominent IPOs) namely - 
Anchun International and Mun Siong Engineering Limited
As you can see, IPOs are gearing up once again but the more important part is how do you play this IPO boom and make a profit for yourself? I have listed it out in a step-by-step sequence...

1) First of all, you Must subscribe for the IPO shares via ATM or Internet Banking! There is only a $2 charge for applying the IPO this way instead of the normal $25 commission you need to pay to your stock broker. You need to do this before the IPO closing date.

2) Next, Check the IPO balloting date. Keep track of the Balloting date and check your bank account balance on the day itself (usually just one day before the IPO listing date) to see whether you have been alloted the IPO shares. Don't be dismayed if you didn't get the IPO shares. More often, IPOs are catered more for other institutions out there instead of for retail investors. =)

3) All hope is not lost even if you are not balloted the stock! It could mean a potential upside on the stock price once it is listed since there is so huge demand! Therefore, wake up early in the morning and keep track of the stock exchange at 8.55am. As soon as you see the IPO stock listed in the exchange, determine whether the price is okay for you to go in and buy.
Usually, with such overwhelming demand for the stock, you can buy right at the IPO opening price and sell at a nice profit later. In case you wonder why some IPOs always start the day higher than the IPO indicative price... it is because Institutional Investors (Fund managers) have already began the buying and selling of shares to each other at higher and higher prices, thus leading to a surge in opening price compared to the IPO price you have seen.

4) Nevertheless, you can still make a profit from it. How do you ensure that you have captured the highest margin possible? In actual fact, you cant. However there is a tactic i can share with you.
Buy in the stock right at 9am and wait for the share price to increase until the max price and then falls back before you sell the stock.
What do i mean? Lets give you an example - Yamada Green.
Yamada Green began the day at $0.365 and shot up to $0.41 before declining to $0.37 to end the day. In this case, you should buy in the stock at $0.365 (maybe a little higher), keep a close eye monitoring it and wait until it declines from the top before you sell the shares. [you see that it goes all the way to $0.41 and starts to drop... meaning the DEMAND, the engine is losing fuel! I would sell once it touches $0.40. A gain of $0.035... around 10%! Not bad for a short day's work!]

The reason for it to go up all the way to the high and selling it after it declines is because you can never know how high a stock can rise due to its overwhelming demand. Doing this allows you to capture the whole range of profits and giving up a little of it after the surge has lost steam. No one can ever predict the high for a stock price and neither can you.
Just Remember this - Do not sell a stock that still has not fallen much from the HIGH. You will tend to curse yourself as why did you sell out so fast, missing all the gains at the back!

To justify my strategy, I have locked in gains using this method before when i played with Capmallasia a few months ago. I was balloted the shares and i sold it only at the 2nd High of the day (meaning once it has fallen from the high). I sold at $2.71 several days later =D

To end this post, i believe that the global economy is on the road to recovery and more IPOs will be coming up. This is a good time to invest in stocks now and ride on the trend and get out just before the next financial crisis happens at 2017 or earlier.

-Warren Buffett, billionaire chairman of Berkshire Hathaway, said that investors
buying bonds now 'are making a mistake.-