Investing in newly listed companies (IPO companies) in the stock market does come with significant uncertainties. Here are some strategies and suggestions to avoid pitfalls:
Focus on financial health: Carefully examine the company's financial statements before listing, looking at indicators such as profitability, debt situation, cash flow, and operational efficiency. Many companies may manipulate financial data for listing, especially be cautious of companies experiencing short-term profit explosions.
Understand the business model and competitiveness: Delve into the company's business model to determine if it has sustainable competitive advantages and market share. If the company merely follows market trends without real competitive advantages, the risks may be higher.
3. Management background and shareholder structure: The background and history of the company's executives and major shareholders can reveal a lot of information. If the management team has rich industry experience, and the major shareholders have not significantly reduced their shareholding after going public, it indicates confidence in the company's prospects.
4. Focus on Lock-up Period: New publicly listed company insiders usually have a lock-up period during which they cannot sell their stocks. Pay attention to whether there is a significant sell-off after the lock-up period ends, as this may cause stock price fluctuations.
5. Market Sentiment and Valuation: New publicly listed companies are prone to valuation bubbles due to market speculation. Avoid being influenced by short-term market sentiment and stick to reasonable valuation as a buy indicator.
Research the underwriters' reputation: If the underwriters of an IPO have good market reputation, they are more likely to conduct rigorous due diligence. However, if...