Topic: How To Invest

What is Pat’s commentary for the week of June 18, 2019

Article Excerpt

Luckin Coffee (ADR), symbol LK on Nasdaq, a recent Chinese coffee-shop chain new stock issue (also known as an IPO, short for initial public offering), seems to be tracing out a pattern that’s all-too-familiar to successful investors. It’s a pattern that leads us to follow a general rule of rarely recommending new issues. The problem is that new stock issues only come to market when it’s a good time for the company and/or its insiders to sell. That’s not necessarily, and often isn’t, a good time for you to buy. In fact, most new issues start out trading in the midst of what we call the broker/media limelight. This is a burst of publicity that grows out of the marketing efforts of the broker, or group of brokers, that have arranged for the initial sale of the stock to the public. When the issue has sold out, the brokers have no further immediate reason to promote the stock. The limelight fades and…