Chicken and egg…

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  • Less not more

The West bombs ISIS.

ISIS bombs the West.

The chicken and the egg.

Which came first? No one knows. But it goes on.

Now, back to our regular beat…

Markets

Overnight, the Dow Jones Industrial Average gained 43.08 points, or 0.21%.

The S&P 500 added 4.4 points, or 0.18%.

In Europe, the Euro Stoxx 50 index closed up 18.5 points, for a 0.52% gain. Meanwhile, the FTSE 100 fell 0.15%, and Germany’s DAX index added 0.31%.

In Asian markets, Japan’s Nikkei 225 index is up 103.52 points, or 0.53%. China’s CSI 300 is down 0.62%.

In Australia, the S&P/ASX 200 is up 2.21 points, or 0.04%.

On the commodities markets, West Texas Intermediate crude oil is US$51.61 per barrel. Brent crude is US$54.32 per barrel.

Gold is trading for US$1,248.98 (AU$1,676.19) per troy ounce. Silver is US$16.91 (AU$22.71) per troy ounce.

The Aussie dollar is worth 74.5 US cents.

Watch now

I hope you checked out my short video interview with Greg Canavan.

If you missed it, check it out here. It’s only 30 minutes long. And, if you’re wondering, it’s not a sales video.

It contains some really interesting insight from Greg on a key part of the Aussie market that we’ve long overlooked — initial public offerings, or IPOs.

Anyway, it’s a must-watch video. Greg knows his stuff. His first role as an analyst was scouting out IPOs. So in a way, with the project we’ve got lined up, Greg’s career has come full circle.

So watch the video now, while it’s still available online. It’s easy. Click here.

Less not more

Last week Amazon.com Inc. [NASDAQ:AMZN] celebrated its 20th anniversary as a listed company.

The stock price is up over 64,000% during that time. Nice.

Today, another stock celebrates an anniversary. It’s Netflix Inc. [NASDAQ:NFLX]. It listed 15 years ago.

Like Amazon.com, its shares have gone bonkers.

Since listing, the share price is up 14,573%. That’s an annual average return of 39.5%.



chart image

Source: Bloomberg
Click to enlarge


To put that in context, that’s five times better than the 8% average annual return achieved by Warren Buffett’s Berkshire Hathaway Inc. [NYSE:BRK/A].

And it’s nearly 10 times better than the average annual return of the US S&P 500 index.

And it’s nearly 12 times better than the average annual return of the Aussie S&P/ASX 200 index over the same timeframe.

It’s another reason to like IPOs. It’s another reason to prefer picking individual stocks as opposed to just following an index — which, we understand, is all the rage right now.

Let me give you some evidence to back that up.

Using data compiled by Bloomberg, I was able to get details of every IPO going back nearly 30 years. I was also able to get the end-of-month pricing data for the Aussie index going back at least as far.

But, to keep this meaningful, I chose to go back five years, to the beginning of 2012, to look at the comparable performance data since then.

Arguably, that’s not a bad starting point. It was later on, in 2012, that the current leg of the Aussie and world bull market began.

Anyway, over that time, according to Bloomberg, there were 465 initial public offerings. Naturally, this doesn’t include any secondary offerings, such as rights issues or share purchase plans.

If you had invested in every IPO (which would have been a tall order), you would have clocked up a 15% return. Granted, that’s not huge, but I’ll explain why in a moment.

In comparison, if you had bought the S&P/ASX 200 index on the last trading day of each month over the same timeframe, your return-to-date would only be 5.4%.

In other words, just buying every IPO over the past five years could have given you a return that’s three times better than buying Australia’s top 200, and supposedly ‘safest’, stocks.

But here’s the important thing: The list of IPOs includes some real big blue-chip duds. Such as the Myer Holdings Ltd [ASX:MYR] and Dick Smith Holdings IPOs.

These are the kind of IPOs that are available to the general public. Almost any investor could have gotten in on those deals.

And naturally, the wider you spread your investments, whether that’s in small-caps, blue-chips, IPOs, or anything else, the greater the chance that you’ll cut your likely returns.

That’s what diversification does. It tends to limit your gains, while (theoretically) limiting your losses. Although, tell that to folks who had a diversified portfolio going into the 2008 meltdown and they may have a different view on diversification.

But, whatever.

The point we’re making here is that while that would have been some kind of special effort to get access to 465 IPOs, that isn’t necessarily the best way to play the IPO market.

It’s certainly not the way recommended by my good colleague, Greg Canavan. If you watched the special video we sent to you yesterday, and which you can watch here, you’ll know that tomorrow we launch our newest investment service: Greg Canavan’s Exclusive IPO Investor.

According to Greg, the only way to play the IPO market is to pick and choose the opportunities. There’s no way that Greg is gunning to jump on board anything like 465 IPOs.

In fact, in any given year, Greg may struggle to break into double figures with IPO recommendations.

That’s because, in truth, not all IPOs are worth speculating with $10, let along $10,000 or even $2,000.

Greg has spent the better part of two years building a network of contacts…people he trusts…folks with a good track record of bringing quality opportunities to market.

As it happens, it was about a year ago that Greg first mentioned to me the idea of an IPO investing service. He’d already started the groundwork. But he had reached a stage where he had enough confidence to believe that this was something that could work.

From then on, it was about getting the process in order, and waiting…and waiting…for the right opportunity to come along.

And now it has. Hence the reason why we’ve had to quickly pull everything together over the past two weeks. Not a small effort, by any means.

But, in my view, the hive and rush of activity at the end is all worth it, for what I believe will be one of the most important, and potentially lucrative, investment advisories we’ve ever offered.

And tomorrow, you’ll get your chance to check out what it’s all about, and the first IPO opportunity on offer.

This truly is going to be stunning. I can’t wait to tell you more about it tomorrow. Please, do stay tuned. I don’t want you to miss it.

Cheers,
Kris