On March 24, I wrote about purchasing Visa (V) after the IPO because my theory was that it would track the performance of the Mastercard IPO because they are more or less equals.
I executed this technique successfully before. I bought Chicago Board of Trade (CBOT) when it went public, because I figured it would behave similarly to the Chicago Mercantile Exchange (CME). I ended up getting rewarded pretty well.
It looks like Visa is working out. The IPO price was $47, and I got in at $65. Today, just over a month later, it is trading at $83.
I think this technique (of buying new issues that have similar market share to stocks that have performed well) works because mutual funds will want to own both.
If you can identify stocks that the funds are going to start buying, then you can "ride" their purchasing. It typically takes them months to build up a position, and all their buying drives up the price.
Wednesday, 30 April 2008
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