It appears while the main indexes have held near their highs this year, there’s seems to be a stealth bear market going on with many of this year’s prominent IPOs.
As has been written about here before (last visited in the link below), this is maybe the easiest trade there is in the the market — buy above the high of the opening day, using that high or the low of the first day (depending on one’s individual risk tolerance) and hang on for the long term:
#IPOs – A Great Year For “Dummies”
Well, it was a great year for the likes of SWAV, PINS, ZIM, BYND, SOLY, that is until summer. While none of these stocks have been stopped out (the high of the first day) they have not been going well since summer but as can been seen in the chart panel below there were opportunities to take profits to preserve profits, especially in crazy run ups in say SWAV or the famous IPO for BYND.
Sometimes when stocks just go silly even the most disciplined IPO investor needs to take notice and thank his or her lucky stocks.
In the larger market picture, this is the kind of weakness that can be seen in many sectors. It is just easy to see here.
P.S. Once again, the LYFT chart is included as a cautionary tale to not buy unless an IPO takes out the high of its IPO day.
(click on the chart panel for a larger view)
LYFT, the ride-share biggie, is a perfect example of not buying into the hype surrounding an IPO.
LYFT came public on 3/29 and dropped almost immediately in on its opening bar, then gaped down the next day (see the charts below). Eventually, it settle down to move sideways until…today. It’s earnings report was terrible, losing $9 a share, more than a billion dollars, despite an increase in revenue and market share. And it had to announce on a day when its drivers are on strike with its biggest competitor coming public Friday.
The stock dropped nearly 11%
If one is an investor, none of this should matter. As outlined in this link below, investors should not even be long the stock until all fundamental and technical finally shake out, if they ever do. (Keep all this in mind also for the upcoming UBER IPO.)
Buying IPOs For Dummies
These IPOs are difficult to short in the initial stages, but traders on biggies like LYFT have options to play with. LYFT’s options came to market five days after the stock’s IPO day (see the charts below). And there is where the downside can be played. The LYFT May monthly 75 puts bought on its own “IPO day”, using the same criteria outlined for the stock in the link above,is now up approximately 150%.
Now that is uplifting.
(click on the chart for a larger view)