by Larry Swing - August 7, 2005

Education

We have written before on the irrationality of IPO prices.  In the wake of the BIDU's tremendous first-day returns and the hype surrounding the stock, we would like to remind you that there is a large body of evidence suggesting that IPOs do not perform well post-issuance.

Ritter (1990) found that IPOs underperfom in the long-run.  Teoh, Wong, and Welch (1998) found evidence of earnings management.  Duffie, Gārleanu, and Pederson (2002) show that IPOs can trade at values exceeding the price that would be set by even the most optimistic of investors.

3-Minute candlestick chart of BIDU:

SwingTracker
MrSwings Real-Time Stock Charts RISK-FREE TRIAL featuring one-click access to Larry Swing's profit-generating indicators - Force Index, EquiVolume, True Strength Index

Analyses of HOLDRs

BBH:  Neutral.  (Biotechnology)

BDH:  Neutral.  (Broadband)

BHH:  Bullish.  (Business to Business)

EKH:  Neutral.  (European Stocks)

HHH:  Neutral.  (Internet)

IAH:  Neutral.  (Internet Architecture)

IIH:   Neutral.  (Internet Infrastructure)

OIH:  Neutral.  (Oil Services)

PPH:  Bearish on a break of support.  (Pharmaceuticals)

SwingTracker
MrSwings Real-Time Stock Charts RISK-FREE TRIAL featuring one-click access to Larry Swing's profit-generating indicators - Force Index, EquiVolume, True Strength Index

RKH:  Neutral.  (Regional Banks)

RTH:  Neutral.  (Retail)

SMH:  Neutral.  (Semiconductors)

SWH:  Neutral.  (Software)

TTH:  Neutral.  (Telecommunications)

UTH:  Neutral.  (Utilities)

WMH:  Neutral.  (Wireless)