In life and investing, it’s important to know who you are and what you stand for.
Just as much, that means knowing who you are not, and what you won’t stand for.
I’ve always been hesitant to criticize investment strategies that I don’t follow. Just because I avoid trying to make money a certain way doesn’t make it objectively bad. And it definitely doesn’t mean other investors are wrong.
But I would feel remiss if I didn’t at least offer a close examination of the pitfalls of investing in IPOs — “initial public offerings.”
Investing in IPOs carries a substantial level of risk, which many aren’t aware of for reasons we can chalk up to survivorship bias — the best-known, most successful IPOs are often the most talked about.
Again, no hate on anyone who likes to invest in IPOs. And especially no hate on anyone who’s found success.
But I don’t recommend IPOs in any of my investment advisories, for very good reasons I’ll share today.
And I’ll also share a bit about the types of companies and strategies I do recommend for any type of investor…
The Coin Flip Problem of IPO Investing (Especially with Instacart)
The elephant in the room is the much-talked-about IPOs of the British semiconductor company ARM Holdings (Nasdaq: ARM) and Maplebear (Nasdaq: CART) — better known as Instacart, the “Uber” of grocery delivery service.
On a personal note, I LOVE using Instacart. I’ve been a member since 2020, when we had our first son and began to run perpetually short on both time and food in the fridge!
That situation only intensified when we had our second son, in 2022, and when my wife got pregnant again earlier this year.
According to the Instacart app, I’ve saved $933 in fees and 179 hours of shopping across 128 orders in the past year alone.
To say I’m a heavy user of Instacart is an understatement. But here’s the thing … I’m not touching Instacart’s newly IPO’ed stock with a 10-foot pole!
See, everybody gets the “FOMO” (fear of missing out) itch when a new IPO hits the market. They worry that if they don’t get in on day one, they’ll miss the boat.
But the facts don’t support that. My research shows new IPO issues have a 50% chance of dropping at least 50%.
Would you flip a coin to make an investment decision? If you’re buying an IPO, you might as well be… And that’s not a risk I can tolerate with hard-earned money.
The stock started trading on April 14, 2021, at $381 a share … and it has never been as high as it was on that day!
In fact, not only did the stock drop the full 50% that I warned it could…
It fell to a low of just $31.83 at the end of 2022 – down a massive 91.7% from its IPO price!
Even after rallying 150% this year, the stock is still leaving day one IPO investors with at least an 80% loss.
And folks, I’m not cherry-picking examples here. Some of the biggest tech IPOs in history — think Netflix, Apple, AMD, Activision-Blizzard and Meta (formerly Facebook) — all fell at least 50% from their IPO price … and often much lower.
That’s why, for me, IPOs are a “no-go” zone.
The other reason should be intuitive to anyone who has a full appreciation of the Green Zone Power Ratings system that underpins my investment strategies.
In short, I use data to recommend positions in established, highly rated companies. Not the newest stocks to hit the market — only the best-of-the-best stocks on the market.
That’s been working well for my subscribers…
My flagship Green Zone Fortunes portfolio currently holds 19 stocks. Those stocks have traded publicly for an average of 17 years.
The average Green Zone Power Ratings score of these stocks is a “Strong Bullish” 84 out of 100…
The average performance of these stocks is currently a total return of 44%…
And the average holding period is a mere 13.5 months.
Juxtapose that against the CART IPO. This past week, after only a few days on the open market, CART was already down 23%.
Sure, that could change tomorrow … maybe the stock will rocket higher and hand day one investors massive gains.
If it does, “good for them.” I won’t be a hater. That’s just not the approach that’s right for me, and it’s not what I recommend you do, either.
I truly believe you’ll grow far wealthier over time if you take a more disciplined and data-driven approach to investing.
That brings me to a “super-charged” stock trading strategy I launched on Tuesday, which uses the power of my Green Zone Power Ratings system, combined with advanced trend and momentum algorithms to create something truly special…
Introducing Infinite Momentum Alert
I’ve spoken about this at length for a couple of weeks now in Banyan Edge, so I won’t repeat everything here. Instead I’ll try, as best I can, to cram this monumentally important trading system into the tiniest of nutshells.
Infinite Momentum Alert has proven its ability to 300X your nest egg over time with a dead-simple stock trading method.
Usually, doing something like that means becoming a full-time market junkie … learning everything there is to learn … and trading in ways that most normal people either can’t, or simply aren’t willing to do.
My newest trading system breaks down those barriers. It distills the most important metrics to beating the market into a 10-minute-per-month stock trading strategy that anyone, of any experience level, can use.
If you haven’t already seen my launch presentation for Infinite Momentum Alert, where I discussed the details on new charter memberships, you can go here now and see everything you get when you sign up.
The first 10-stock portfolio has already gone out to new subscribers. The time to join them is right now, at the ground floor, with many years of market-beating gains to look forward to.
Again, you can find all the relevant info right here.
To good profits,
Chief Investment Strategist, Money & Markets