{"id":63123,"date":"2014-11-04T22:12:03","date_gmt":"2014-11-05T03:12:03","guid":{"rendered":"http:\/\/countingpips.com\/?p=63123"},"modified":"2014-11-04T22:12:03","modified_gmt":"2014-11-05T03:12:03","slug":"forget-medibankthese-stocks-look-the-goods","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/11\/forget-medibankthese-stocks-look-the-goods\/","title":{"rendered":"Forget Medibank\u2026These Stocks Look the Goods"},"content":{"rendered":"
November 4, 2014<\/div>
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By MoneyMorning.com.au<\/u><\/a><\/p>\n

Another day dawns. The stock market<\/strong> opens for business \u2014 but don\u2019t be surprised if today brings a quiet trading session.<\/p>\n

The city of Melbourne has hung up the \u2018out of office\u2019 sign in honour of a horse race. Collins Street is deserted and the Members\u2019 Enclosure at Flemington Racecourse will be bumping.<\/p>\n

Public holidays are a great time to sift through your \u2018to do\u2019 list. We often find it\u2019s a rare chance to take stock of potential investments<\/a>.<\/p>\n

One piece sitting in your in-tray deserves special attention.<\/p>\n

But it\u2019s not for the reasons you might suspect\u2026<\/p>

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We\u2019re sure you\u2019ve heard the news.<\/p>\n

In case you missed our piece about Medibank Private<\/a> on Thursday, the Australian government is selling its health insurance company. It will float on the Australian Securities Exchange (ASX) later this month through an initial public offer (IPO).<\/p>\n

You might be one of the 750,000 Aussies who pre-registered to receive the Medibank Private share offer prospectus. If that\u2019s you, today might present your first chance to consider the offer.<\/p>\n

The glossy brochure might wow you. But IPOs are not necessarily the rolled-gold opportunities that their spruikers would have you believe.<\/p>\n

We showed you what we thought of this deal last week. The way we see it, the price is on the nose.<\/p>\n

That\u2019s the final word when it comes to IPO investing \u2014 or, for that matter, any type of investing<\/a>. <\/p>\n

A company might benefit from the most profitable trends in history. But if somebody \u2014 in this case, the Australian government \u2014 sucks you into paying too much for the stock, you\u2019ll lose money.<\/p>\n

Paying over the odds is always a danger in deals like this. That\u2019s because companies only bother listing on the ASX when the broker can assure the vendor of a nice high sale price. <\/p>\n

Mixed performances<\/h2>\n

Sentiment in the Aussie stock market<\/a> has been good enough over the past year and a half to entice dozens of companies to join the ASX list. <\/p>\n

In fact, since the \u2018IPO window\u2019 burst open as Australia\u2019s equity capital markets roared back to life in early 2013, more than 90 formerly private companies have listed.<\/p>\n

That includes \u2018reverse IPOs\u2019, of which there have been several this year. A reverse IPO happens when a private firm lists on the ASX by merging with a listed shell company. <\/p>\n

You won\u2019t see reverse IPOs included on most lists of floats. But just as a reminder, we showed you how you could benefit from reverse IPOs in this article <\/a>back in May.<\/p>\n

Anyway, we thought a public holiday as good a time as any to review how these new faces have performed since listing.<\/p>\n

It probably won\u2019t surprise you to hear that those 90 stocks have put in mixed performances. Most are up\u2026but many are down.<\/p>\n

Some have provided sensational, if erratic, returns. Indoor Skydive Australia Group Ltd [ASX:IDZ]<\/strong> is up 180% since listing in January 2013. <\/p>\n

That being said, timing is everything<\/a> with this stock. IPO investors who sold IDZ after 14 months would have bagged gains of as much as 325%…but if you were on the other side of that trade in March, you\u2019d now be face-to-face with a 34% loss. <\/p>\n

That alone should show you that IPO investment is a risky game. You should only invest money in these kinds of companies that you can afford to lose.<\/p>\n

Some new stocks<\/a> have gone from strength to strength. For example, since listing 18 months ago, law firm Shine Corporate Ltd [ASX:SHJ]<\/strong> has steadily risen to show IPO investors a 160% gain.<\/p>\n

But others have dropped like a stone and are yet to recover. One of the worst culprits has been New South Wales coking coal developer Malabar Coal Ltd [ASX:MBC]<\/strong>. Since listing in March 2013, Malabar has scarcely traded anywhere near its $1.00 offer price. At last count, the stock was down 88%.<\/p>\n

Rich pickings<\/h2>\n

Here\u2019s why some IPOs grow in leaps and bounds and others stagnate.<\/p>\n

From the newest listing to the oldest veteran, most of the performance of any stock comes from two elements. <\/p>\n

The first is the price you pay for the stock. We\u2019ve shown you why that factor alone has turned us off the Medibank Private float.<\/p>\n

The other is the attractiveness of the industry the company plays in.<\/p>\n

Much like how a rising tide lifts all boats, a growing market tends to boost stocks across a sector.<\/p>\n

And the sectors that provided the market darlings of the past 18 months will not necessarily yield such rich pickings into 2015.<\/p>\n

That\u2019s why right now, we\u2019re warming up on resource stocks<\/a>.<\/p>\n

No matter how tough the market may be, some resource stocks can still go up. Those moves are usually due to big news on the financial newswires \u2014 like a resource upgrade or new discovery.<\/p>\n

The best time to punt on resource stocks to get the biggest bang for your buck isn\u2019t necessarily during a bull market or in the middle of a bear market.
\nThe best time is when most people have given up on resource stocks.<\/p>\n

That\u2019s also when you can identify the beginning of a new trend.<\/p>\n

Put those two factors together and it spells a great opportunity for speculators to get into the market before the next resources bull market rally begins.<\/p>\n

As always with small-cap resource plays, there’s no guarantee these bets will pay off. But there has never been a better time to take that chance. Go here<\/a> to find out how you can stake your claim.<\/p>\n

\nCheers,<\/strong><\/p>\n

Tim Dohrmann+<\/a>
\n Editor, Money Morning<\/em><\/strong><\/p>\n

From the Port Phillip Publishing Library
\n<\/strong>
\nSpecial Report<\/strong>: Return of the Wildcatters<\/a>: One area off the coast of the Philippines contains up to 380 million barrels of oil. A hardened team of Aussie drillers holds exclusive rights to extract it\u2026and they\u2019re going for every last drop<\/a>.<\/em><\/p>\n

The post Forget Medibank…These Stocks Look the Goods<\/a> appeared first on Stock Market News, Finance and Investments | Money Morning Australia<\/a>.<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au Another day dawns. The stock market opens for business \u2014 but don\u2019t be surprised if today brings a quiet trading session. The city of Melbourne has hung up the \u2018out of office\u2019 sign in honour of a horse race. Collins Street is deserted and the Members\u2019 Enclosure at Flemington Racecourse will be bumping. […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-63123","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/63123","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=63123"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/63123\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=63123"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=63123"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=63123"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}