It’s difficult to analyze stocks of established companies. To Invest in IPOs is even trickier to evaluate. Since there aren’t much of historical information. Several companies, including few big names experienced big gains initially, but they ended up disappointing their investors over the long run. People who have the foresight to get in and out, made investing look easy.
However, investments are not a sure thing. Investors should not expect the double or triple digit earnings which some people might have earned in early tech IPO days just by flipping their stocks. Money is still there to make in the IPOs. But focus today has moved from quick money to long-term gains. Rather trying to capitalize on the stock’s initial bounce, investors are today inclined to wisely scrutinize the long-term vision.
Even if you are having a longer-term perspective, judging an IPO is not an easy task. IPOs have various unique risks which differentiate them from average stock that is trading on the exchange for some time.
If you are looking to try your luck in an IPO. You should do thorough search over the Internet with respect to information about the company. And its financing, competitors, past press releases and the overall industry health. However, info may be limited, to educate us about the company. But it is an important step to make a sensible investment decision. Your research might lead to the finding that the prospects of the company are being blown out of proportion and that investing in that particular IPO may not be a good investment idea.
In no way it is being suggested here that we should avoid to Invest in IPOs. Investors who have gone for stock at IPO are rewarded generously by companies in the past as well in recent times. Every month companies go for public offers. But it is a tough task to go through each one of them in details.
It is advisable to keep in mind that while dealing with an IPO offer. An informed and skeptical investor is more likely to perform better.