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How to Buy IPO Stocks — and When - YouTube
Channel: StocksToTrade
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- In the last couple years
and particularly in 2019,
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IPOs, initial public
offerings have been hot.
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Why do you trade 'em?
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And most importantly,
when do you trade 'em?
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That's what I'm gonna talk about today.
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So ring that bell.
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In today's video, I'm
gonna talk about IPOs.
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Why you want to trade them
and actually a little bit
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of what they are and then I
think the most important thing
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is when to trade them.
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So let's kind of start out
with the big 10,000 foot view,
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what is an IPO.
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You might hear that term.
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It is the initial public offering.
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So most companies, well
probably all companies
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start out with some
sort of private funding.
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Whether that be you started a business
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with $500 of your own money,
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maybe you borrowed some
money from your parents,
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maybe you got an investor
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or maybe you proceeded
all the way through.
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You know a lot of companies
are boot strapped.
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My company that I
started 12 years ago now,
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no, no, 20 years ago now, I'm gettin' old,
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was entirely boot strapped.
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We had basically put a couple
hundred bucks in the bank,
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we drove all the money
back into the company,
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built it up and then I eventually
retired from that business
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to go into full-time stock trading.
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But anyway the idea is companies
start out privately funded.
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As they grow up, and as they get bigger
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and they want to expand,
they want to hire employees,
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maybe expand overseas,
build another factory,
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they need more capital
and that's when they go
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to the public markets.
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That's when they list
to be publicly traded
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to sell equity on the public markets.
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So now instead of
getting money from a bank
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or a private investor or their parents
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or a friend or whatever, they're
going to the public market.
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So now you, as an investor
in the U.S. Stock Exchange,
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you can buy a small piece of this company
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because you believe in it
and you think the value
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of the company will go up over time.
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They take your capital, fund operations,
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ideally increase profits,
grow the company,
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you get rewarded over time.
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It's the same model, they're
just going to the stock market
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instead of pursuing private funding
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or from a bank, et cetera.
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So now you know what an IPO is,
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why do we want to trade them?
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Well the why is mania.
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People love hot IPOs.
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I mean whether it be you
know back in the dot com era
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if you're old enough to remember that.
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That was the craziest mania.
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Stocks would publicly
list and just go insane.
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Now we've seen that also in 2018, 2019
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with I believe at this point of recording,
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a great example is Beyond Meat.
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BYND is the ticker.
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And I admit, I'm skeptical of the company.
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They make artificial meat, a
lot of chemicals, et cetera.
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But the fact is, everyone
is in mania mode.
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They see this as the future
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and this stock listed
in the 70s and went up
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as high as over 200 in a few weeks.
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It's pulled back a little bit as of today
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but it's also trending back.
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And we've had tons of other hot IPOs.
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Pinterest, Uber, Lyft,
they go on and on and on.
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But the reason the why
behind it is animal spirits.
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People see these companies.
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They see the potential.
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They want in now.
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And you can capitalize
on that as a trader.
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Now I'm gonna talk about the when,
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that's the most important thing.
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You don't get suckered as a
day trader, as a smart trader,
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as a real trader, you don't
get suckered into the mania.
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You calculate it and you
attack at a good time.
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Newbies, people that believe the hype,
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they buy day one of the IPO.
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I would tell you 99% of
the time never buy day one.
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Almost never buy day two.
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What you want to focus on and the when
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and this is the most
important part of this video,
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you want to let the chart tell you, okay?
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I'm particularly a technical-based trader.
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Most short-term traders are.
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We believe in the charts.
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And what you want to look at
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is let that chart form out, okay?
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You don't care about that day one spike
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because lots of times they
slam hard later in the day,
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they gap down the next day.
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Maybe they gap up the next day.
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It's not predictable.
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What you want to look
for is being that sniper.
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Have that plan, let the chart tell you
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where this stock is headed.
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So if the first couple
days are big up and down,
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up and down, then the
stock starts consolidating,
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starts trending higher, whether
that be three days later,
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three weeks later or three months later,
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that's when you look to attack.
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One of my favorite
examples is Facebook, okay?
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Bring up the 20 year chart of Facebook
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in your charting platform.
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You'll see that stock opened up, spiked,
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and it spent I believe,
I'm doing this from memory,
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almost two years going nowhere.
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Then broke out and become
one of the best stocks ever.
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So you gotta be willing to
wait for the right time.
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Look for that consolidation
and then the break, okay?
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Be smart, be a real trader,
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not just getting sucked into the mania.
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So let me know.
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Comment below.
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Have you traded IPOs?
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Have you done well or
have they burned you?
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And if they burned ya, did you
trade 'em day one, day two?
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So drop me that comment
below and thanks a lot.
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