Investors need to look beyond IPOs

Article Excerpt

As we’ve often written, the odds are skewed against you when you enter the market for certain kinds of investments. One of these is the new-issues, or IPO (Initial Public Offering), market. You can get lucky in the new-issues market, just as you can in the used-car market, or in a lottery. But the odds are against you. New issues generally only come to market when it’s a good time for insiders or the company to sell. That isn’t necessarily a good time for you to buy. Often, in fact, it’s a good time to stay out. Instead, we recommend looking for upcoming stock spinoffs rather than new issues. In fact, upcoming spinoffs provide opportunities that are as close as you can come to a sure thing in investing. Numerous academic studies show that spun-off stocks, and the companies that spin them off, tend to do better on average than comparable companies not involved in spinoffs. spinoffs. …

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