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Stock lessons: IPOs

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First let’s mark Oct 14 2009: Dow 10,000 2.0 (Yahoo Tech-ticker video below)

(did you notice the Yahoo ~~~ in the end, Yahoo became more goofy under Carol)

My topic today is IPO. I have not got much luck from IPO investing (to be more precise, speculating). My lessons are the following:

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My Q1 2008 grades

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(Update Apr 2) Another news to make myself feel better, Chinese A share mutual funds declined 22% on average (read this Chinese news from Money-Courier). For comparison, Shanghai Composite index dropped about 34%, from 5261.56 to 3472.71 in the period. Note that index is not a good benchmark index because it’s skewed by some big cap stocks such as PetroChina (601857.SS).

(Original Apr 1) I was a decent student in elementary school, but from time to time I did get bad grade in an exam. The tough part for me was getting the report to my mom 🙁

The most miserable quarter
I’m sure lots of money managers will share my “most miserable” comments. My little portfolio shrinked about 25.23% from Dec 31, 2007 to March 31, 2008. Thanks to my bone headed bets on LFT and CROX stocks. For comparison: “In the first quarter of 2008, the Dow fell 7.55% and the S&P 500 index lost 9.92%. The Nasdaq was by far the worst performer among major U.S. equity benchmarks in the first three months of the year, dropping 14.07%.” (source: Business Week). To make myself feel slightly better, note GOOG and AAPL dropped about 33% and 25% in the same time period, respectively.

Lesson learned
1) In early Jan. I told my wife I need to unload LFT and CROX, so that I can sleep well in the night. I finanally was able to pull the trigger on them (LFT in Jan and CROX in Feb). A bit too late (CROX went from 75 to 19 in 3 months). But I’m glad I fufilled my words to my wife on this one (see below what if).

2) Trading cost: 7*45 = 315, not significant, but still sizable. Looked at other discount brokers such as TradeKing, IB but have not decided to switch. I will reduce trading times and increase the size of trading (make more sure bets), to reduce the trading cost.

Good things
Finally I was able to get back to In value I trust. I also got back to more solid stocks such as CHL, RIMM, SYT. And I was able to take some profits when I saw opportunity (don’t want be a pig).

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Sillicon valley stocks and St. Louis stocks

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Tech for Silicon valley and agriculture for St. Louis.

Silicon Valley Stocks
We went to Sillicon valley for the holidays and obviously, stock is one common topic in family reunion and friends gathering. Note stock options makes up a significant portion of employee’s compensations for some of the technology companies there.

I happened to read the San Jose Mercury News Jan 1, in which it has a nice summary of how Silicon valley stocks did in last year. In summary, the big tech (GOOG, AAPL) and IPOs (VMW, NetSuite) lead the Silicon valley stocks to a fairly good performance. Here are two articles I read: tech titan’s year; Valley’s big year for Wall St. debuts.

St. Louis stocks
I tried to look up St. Louis stocks 2007 performance at stltoday, the web site of St. Louis Post Dispatch, but could not find any. So I just list St. Louis companies I know.

I believe Monsanto (MON), one of the largest agriculture company in the world, is the No. 1 performer last year. MON is enjoying the global farm booming, and in a way the oil boom too. By the way, I live right across the street from the company. ADM and Bunge, another two agri play, also did well.

St. Charles based solar play MEMS (WFR) also faired well very amid the all the solar boom. Note WFR is a leader in this area.

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NetSuite IPO update

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It priced at $26, according to AP news.

I did NOT bid on NetSuite IPO eventually. Two things: it raised price range from initial 13-16 to 16-19; and I noticed NetSuite is not profitable so far. On the other hand, when its bigger rival, the on-demand software provider SalesForce (CRM) did IPO in 2004, it was about to turn profitable.

Don’t know the exact reason why the recent weak Mr. market valued it so high. I remember more than 3 years ago CRM was priced in mid teens range during IPO. I suspect the recent strong show of VMWare is one reason. Like the Baidu situation in 2005, it did IPO one year after the successful IPO of Google, people (who missed GOOG) bid up BIDU from the IPO price of $27, to openning price of $70. The night before IPO I was planning to buy it at $35, and get out at $42. My plan did not get executed because I was way too conservative 🙂

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One company, multiple faces

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AAPL: is Apple a computer maker, an eletronic (fashion) gadgets maker, or music store? It’s all of the above. I did not realized it’s the No. 3 music retailer in the US until a few weeks ago (behind Wal-mart and Best Buy). The reason is it created the digital music market: iTune.

For graphical designers, Apple is a computer maker; for music lovers, Apple is the new “Sony” because the iPod is the new “Walkman”. For musicians, record and movie companies, iTune is the retail channel. I think that relation is similar to that between Cocacola and McDonald (Coke relies on MCD to sell its coke, Sprite etc.)

GOOG: many people misunderstood it when it went public in Summer 2004, it’s just another technology (search) company, right? Now we all know it’s the world largest advertisement broker (Internet). For many small business owners, it’s the place to put target ads (AdWord); for publishers and bloggers, its adSense let them make money. Of course for web users, it’s arguably the best search engine. For Bill Gates and his troops in Redmond, it’s the biggest threat.

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Another Milestone for GOOG

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Today marks another milestone for the search giant Google, its market capital (outstanding shares times the stock price) exceeded Warren Buffett’s good old Berkshire Hathaway’s market cap $165.71 B at one point (when Google stock hit today’s high at $534.99), GOOG closed at $527.42 (with a market cap of $164.32 B).

BRK.A is a holding companies of some well known companies, such as Geico and Diary Queen. Just think Wall Street values Google as valuable as all these (50?) very well managed traditional companies putting together, are we seeing another bubble here?