Green Alien IPO Trading

Interactive Brokers IPO

2007-04-24T08:17:00.000-07:00

IBKR
THE BUZZ
Everyone knows that exchanges to going public has been a great success. Just when when we thought they had all gone public one more pops up. IBKR is a quiet one that I think will make a big splash. Interactive Brokers Group has for the past 30 years developing an integrated trading system and communications network that plugs into dozens of exchanges around the world.
It's the No. 1 liquidity provider on the ISE, the Chicago Board Options Exchange and the Philadelphia Stock Exchange. Sounds more interesting now doesn't it? IBG's business model depends more on exchange volume than price, so all the volatility we have been experiencing may be making us pull our hair out but it makes IBKR richer. The real question is how does a guy with one arm work so fast? I think its the aliens that have them the one arm technology for thier icon as well as other technology.

IBKR HISTORY
Thomas Peterffy was one of the first traders to use computers to determine fair market value when he joined the American Stock Exchange in 1977. At the time I would have joined too if I my application into kindergarten had not been accepted (joining American Stock Exchange was my second choice). In 1983, he formed Timber Hill. That company was the market-making part of the business. He then pioneered the use of handheld computers on the trading floor. The company went on to develop a full system, and in 1993 it branched out into brokering. Those two lines of business (along with selling unused paperclips on eBay) still provide all the revenue.

I will now quote big numbers and percentages to make me sound smart. About three-quarters of total revenue comes from Timber Hill. (to help you visualize buy a blueberry pie and cut it into 4 big pieces) It operates on dozens of stock and commodities exchanges around the world, providing liquidity by offering water to its employees and competitively tight bid-offer spreads. IBKR has 357,000 tradable, exchange-listed products, including equity derivative products, equity index derivative products, equity securities and futures.
The company's technology uses proprietary mathematical models (they got it from the aliens)that assimilate market data and reevaluate outstanding quotes each second, giving it a volume that can be profitable even with fairly low spreads. They have 80,000 customers at this point unless Jeff their oldest customer dies. In that case they will have to reprint their prospectus to say 79,999 customers. Have I bored or lost everyone yet...no!? OK Ill bunch up the rest of the numbers to make it painless.The systems let customers use 50 exchanges in 10 different currencies and draw a 60% gross margin while keeping fees competitive (I say that so you wont feel as riped off as you really are) IBG estimates that it was involved in 15.9% of exchange-listed equity options traded last year.

WHAT IF THE SH#T HITS THE FAN?
The main problem with IBG's numbers is its debt which now stands at $1.6 billion. (pocket change you say right?) Although the debt-to-equity ratio is still comparatively good, this has meant a sharp rise in the interest expense, which more than doubled last year to $484 million.
Management is selling off part of the company to raise its profile and improve its tax position but they don't want the numb skull stockholders to screw up the company. So Peterffy and his affiliates will still have kept almost 95% of the voting power. So see, its a no brainer you can buy as much stock as you want and not be worried about messing up the company! (that's the glass half full mentality)The company depends on its proprietary technology for its edge which they are afraid the aliens might come and take back. The general trading field has been subject to increasing regulation and litigation in recent years.

SHOW ME THE MONEY
IBG's numbers declined in 2004 due to more competition but frankly who cares because but since then business has been great. Last year revenue rose 58% to $1.7 billion, while net income gained 37% to $734 million.

WASTE OF PROCEEDS
IBG expects to net $490.6 million from the sale of 20 million shares. It will use the money to buy out the membership interests of 66 employees who own portions of the company. So the money will not do squat to help the company grow.

CONCLUSION
While there are some negatives as pointed out above the chance of success and the investor enthusiasm will cause this IPO to be a success. As always too much enthusiasm can drive the stock up in premarket so be very careful. I believe that it will be profitable to get in at open and go for a two point jump. After that get half a position out and let it cool. Buy back that half at a lower price and then hold for 1+ years. That's my plan hope it works out for everyone.

I still highlight one IPO per month here

2007-03-22T15:16:00.000-07:00

I plan to continue to play some of the hotest IPO's and post the research on them once per month. However most of my time will go towards my art blog. Feel free to check it out as I have just began to work on it. The address is http://exhaleart.blogspot.com/

I'm going to be an artist now, good luck to all of you!

2007-03-19T19:47:00.000-07:00

Well, the time has come for me to move my efforts away from stocks. I had planned to do stocks for a while until I was able to support doing my passion. I will now pursue art full time. I have a degree in art and make artistic furniture, specifically clocks (that's one of my clocks pictured above) Thanks to everyone who has read my blog. I hope you found it useful. I will be starting a new blog for art work shortly. I understand the same crowd may not be interested but I will post a link anyhow. Good luck to all of you continuing in IPO's. I will certainly continue to participate in the hot IPO's but will not dedicate time to posting research. I will continue to post occasionally at invesorvillage but not nearly as often as I have been. My parting advice is alway keep learning and reaching higher.....never be satisfied with the knowledge you have.

Optnext

2007-02-13T10:49:00.000-08:00

Opnext is the next of the tech stocks catering to the shortage of bandwidth. However we have had such a broad range of performance on these its hard to predict exactly how this IPO will be accepted by the investment community. (think RVBD and OPTM) One thing is for sure we have already had several companies in this sector go public creating a larger supply of stock in this sector. That is likely to damper short term big runs.

OPNEXT (OPXT) Business Overview (from prospectus)
We are a leading designer and manufacturer of optical modules and components which enable high-speed telecommunications and data communications networks globally. Our transceiver modules, which typically utilize our lasers and detectors, convert signals between electrical and optical for transmitting and receiving data over fiber optic networks, a critical function in optical communications equipment. In particular, we are a leader in both the telecommunications and data communications applications for the fast growing market for 10Gbps and above transceiver modules and optical components with a long history of market innovation. Our expertise in core semiconductor laser and other optical communications technologies has helped us create a broad portfolio of products that address customer demands for higher speeds, wider temperature ranges, smaller sizes, lower power consumption and greater reliability than other products currently available in the market. We view ourselves as a strategic vendor to our customers and have well-established relationships with many of the leading telecommunications and data communications network systems vendors such as Alcatel-Lucent, Cisco and Hitachi.

Offering: 16.9 million shares at $13.00-15.00.

I wish the float was smaller and I give it a 5

Net proceeds of approximately $125 million will be used to fund future capital expenditures and for the expansion of R&D of new products and the enhancement of existing products.

Excellent use of proceeds. I give it a 10

I would give this sector an 8 for overall performance and growth potential

Lead Underwriters: Goldman Sachs, CIBC World Markets

I like the underwriters and I give them a 7

Financial Highlights:
Overall sales increased $23.1 million or 59.9% to $61.7 million in the three month period ended December 31, 2006 from $38.6 million in the three month period ended December 31, 2005 including a decrease of $0.1 million due to fluctuations in foreign exchange rates...Gross margin increased $11.0 million or 102.8% to $21.7 million in the three months ended December 31, 2006 from $10.7 million in 2005 including a $0.1 million benefit from fluctuations in foreign exchange rates and a $1.6 million charge to increase excess and obsolete inventory reserves. As a percentage of sales, gross margin increased to 35.1% for the three months ended December 31, 2006 from 27.7% for 2005...Research and development expenses increased $0.3 million to $8.4 million for the three month period ended December 31, 2006 from $8.1 million for the three month period ended December 31, 2005. Research and development expenses decreased as a percentage of sales to 13.7% for the three month period ended December 31, 2006 from 21.0% for 2005.

I like the growth and the increased margins. I give it a 6.5

Ill venture to guess that it prices at $16 above range which would give it a 9

Total score is 7.58 (assuming that it prices where I guessed)

My gut feeling is that this will be great for people getting allocations but will disappoint in aftermarket performance. Of course this depends how high it opens and if Cramer draws attention to it. If this slips under the radar and opens below 19 then I think it will make for a great run.

SDXC opens this morning

2007-02-08T07:49:00.000-08:00

I plan to make a point on SDXC. I am placing a limit order at 25.50 and will place an order to sell one point higher of where it opens. It will move fast and drop a lot after making a point so be careful on this one.

I was wrong on this one. Got out at 20. It has opened weak and may have intra day Resistance at its open 22. It might act like OPTM a while back that went down for a few days before starting back up. I got in at 22 and out at 20. I will wait and see what this does and may find a new entrance point when it shows strength.

Is Fortress going to rock?

2007-02-04T11:09:00.000-08:00

We have a first of its kind IPO. This should be very interesting. Due to its high profile I expect a lot of interest in this one. I think private investors as well as several funds will be looking to get in on this the first day. However we have no precedent to predict how an IPO of this kind will do. That makes our entry point very crucial. I will post how exactly I plan to play this one when the timing gets closer.

"FORTRESS INVESTMENT GROUP (FIG) Business Overview (from prospectus)
Fortress is a leading global alternative asset manager with approximately $29.9 billion in assets under management as of September 30, 2006. We raise, invest and manage private equity funds, hedge funds and publicly traded alternative investment vehicles. We earn management fees based on the size of our funds, incentive income based on the performance of our funds, and investment income from our principal investments in those funds. We believe our funds have produced consistently superior investment returns. We intend to grow our existing businesses, while continuing to create innovative products to meet the increasing demand of sophisticated investors for superior risk-adjusted investment returns."

It will be nice to have access to a fund like this with the convenience that a stock gives. So I like its business a lot. I give this an 8

"Offering: 34.3 million shares at $16.50-$18.50 per share. Net proceeds of approximately $533.0 million will be contributed to the Fortress Operating Group, which will use the proceeds to pay off debt and for general operating purposes. "

34.3 million shares is a large float and will make a huge pop harder to create. We would be more excited with a 10 million share float. So the float size is a strike against it. I give that part a 4. The use of funds is good/fair. I give it a 7.

Lead Underwriters:Goldman Sachs, Lehman Brothers.

Good underwriter for pre and post market performance. I give it a 9.

Financial Highlights:
Nine Months Ended September 30, 2006 compared to September 30, 2005: Total revenues increased by $561.2 million... Management fees from affiliates increased by $45.3 million...Incentive income from affiliates increased by $54.4 million...Interest and dividend income relating to holdings of our consolidated investment companies increased by $423.1 million.

I like the growth they are showing. I give it a 7.5

In total so far Fortress gets a 7.10 which makes it of strong interest in my book.

DEP, thats pretty darn good timeing!

2007-01-30T18:22:00.000-08:00

DEP prices at high end today. The same day the natural gas rallies 11%. Wow that is very nice. I think this makes it a good play for tommorow, both long and short term. I plan to buy half at open and add half at first dip. More update on this later.

GPS Short Alert

2007-01-24T18:35:00.000-08:00

I am placeing an order to short GPS at 19.99 in premarket trading. GPS (Gap) is currently at 19.93. I plan to cover the short at 19.75 within the first half hour of regular hours trading. I will update in the morning.

UPDATE:Unfortunatly I missed the open. It has had a nice drop and would have been a great short even getting in at its regular hours open price. We will try for th next one.

The time machine is complete!

2007-01-20T08:27:00.000-08:00

Since everyone seems to be talking about AVAV it would be useless (or less impressive) if I just put AVAV through my rating machine. I have decided to go a step further and create a time machine so I can go into the future get the first day trading chart and bring it back to my blog. Here is the chart:

Now there is just one problem. At first I accidentally went to the past (was not sure how to run the machine) and may have slightly altered the course of the future. So just in case I'm leaving room for 1 point plus or minus deviation from the chart above. (Most likely 1 point minus on all my numbers)

I expect this to be a good day trade but not longer. With Cramer having spoken of this IPO favorable we will see over enthusiastic buying on the first day in a stock that is already priced at a premium. It has no competitors so even at its mid range its going to have a high multiple. I expect at least 30 days of pullback before it gets back to a fair price.
At $15, AeroVironment shares would trade at almost 27 times earnings. Israel's Elbit Systems Ltd. trades at 19.5 and Lockheed Martin Corp. 17 times 2006 earnings, according to Reuters Estimates

UPDATE: Here is my plan tomorrow. First we have to be ready to react to the chart so this plan may change quickly. However for now I plan to pre bid at 25 hopefully get in at 22 and sell just under 25....if it looks like its still running sell half at 25 shoot for 26.50 for the other half. I expect to be in and out in 12-13 minutes after open. Good luck to all and remember IPO's move fast. Paper trade until you get a feel for how they move.

UPDATE POST IPO: It opened at 25, too high for what I wanted. My order did get filled and I sold at 26...no more upside in this today in my opinion. 1 point gain still makes it a good trade.

Here is how the chart after the first day looks like:

My guess turned out to be too low at open. And the range was smaller than I predicted. However it did have the predictable big spike with a big pullback and ended the day below the open price.

note: I'm sure everyone understands I am kidding about going into the future so don't use this chart for real. Its just my best guess and for entertainment purposes. IPO's can be risky use your discretion and due diligence and blah blah blah.......

Are you still paying for your stock trades?

2007-01-12T12:28:00.000-08:00

Many of us who like to trade long term as well as short term end up paying a lot in commissions. However, now that is a thing of the past. There are two good options for commission free trades. The first is Zecco.com. Here is an explanation of what they do right from their web site: "We bring you free trading through Zecco Trading. That’s right, you can trade securities for $0 commission for the first 10 trades a day and 40 trades a month. After that, you only pay $3.50 per trade. Option trades are only $3.50 plus $.60 a contract." Don't get me wrong I'm not trying to sell them for any gain of mine I just think its a great thing that many don't know about. I listed Zecco first because I think it is the easiest and in many ways the best. The other one is Bank of America. Now there's has a catch. You have to have 25,000 or more to qualify. The nice thing is that it does not all have to be in the brokerage account. It can be in a checking account with BofA. What I like about BofA is the sweep set up you can do. The money can be in your checking account then when you buy a stock it goes into your brokerage account. For that I give BofA a 10 on convenience. Here are link to Zecco:

http://www.zecco.com/Default.aspx

Here is the link to Bank of America:

http://www.bankofamerica.com/investing/?cm_mmc=BAI-SD-_-YAHOO-_-bank%20of%20america%20online%20trading-_-ddt&gcid=S16708x035&keyword=bank+of+america+online+trading

As a disclosure I do own shares of Bank of America. I have them because I think they will start taking market share from Ameritrade and Scottrade because of their free brokerage account.

No worries I will be getting back to IPO analysis when the IPO market picks up.

Why FRPT is a buy

2007-01-10T21:18:00.000-08:00

As you all can see I have FRPT on my buy list under 18. FRPT is currently an OTC stock. However we have word that they have secured a NASDAQ listing and will be changing over. This is the event we want to get in front of. If you look at the video presentation on their site you will get a run down of the great growth rate they have had (take a look http://forceprotection.net/). FRPT has had an incredible run and the last bearish article was written not long ago when it was at $8.00 per share. Now that its more than double its safe to say the bears have been wrong. Of course we do not want to mitigate the risks. They are a defense contractor dependent on the budgets that congress will make. Also a resolution in the war could cause people to leave this stock. Lastly it has had a great run and there are many investors sitting on a nice profit, we expect profit taking at any sign of a problem. However, the upside potential that the NASDAQ listing affords outweighs the risks in my opinion. There are many funds that cannot invest in this stock while it is an OTC listing. That money should flow in once this moves to NASDAQ. So take a look at this and watch to get in on dips. As always do your own DD and weigh the risks carefully. There is a lot of discousion on this topic on the investor village baord http://www.investorvillage.com/smbd.asp?mb=132&pt=m&clear=1 where you can ask more questions.

UPDATE: We just had an incredible run today. I hear the NAZ listing will be on the 18th and FRPT will ring the open bell. I added to my possition under 20.

New coverage by The Street http://www.thestreet.com/_yahoo/newsanalysis/general/10332262.html

Short Play of the week

2007-01-09T15:12:00.000-08:00

Here is this weeks short is ECOL. Currently at 18.85. I am shorting now (6:20) and I have a second short order at 18.90. I look to cover in the moring at 18.25-18.40

Update: ECOL is currently at 19.11 at 7:46. We will watch this very closely in the morning. We will want to have an standing order to cover if it goes above 19.50. If ECOL drops in first half hour in regular session we may take profits at higher levels than before. I may start to sell at 18.50-18.75. It all depends in how the actions shapes up in the morning.

UPDATE: After we shorted the price continued to run to 19.17. At this point it is at 19 and looks like it will not drop enough. We will close our possition between 10 and 10:15...it is actually moving faster now 18.95. We may just break even on this one.

UPDATE: We have placed an order to cover our short at 18.80. We got a partcial fill. We will look to close at that level.

EXITED: This is the safest point to leave the trade. We got 2/3s filled at 18.80 and 1/3 filled at 18.85. This did not turn out to be profitable as expected but at least it was not a loss...hope to do better next week.

How to use the weekly short picks

2007-01-09T09:09:00.000-08:00

Since I plan to start giving one short trade per week I wanted to explain how it works. First off, shorts are risky, try them at your own risk. Second they are even more risky if not executed as intended. These are all going to be very short term trades. Typicaly I will post the trade when I see the price right. This will most often be in afterhours. The intent will be to cover the short the next morning between 10 and 10:15 EST. These will be trades for small gains and will typicaly be designed for 500-1000 share purchases minimum. We will at times use price goals along with time goals. If the price we seek does not fill within the timeframe we will close the trade regardless. Sound risky...well it is. I will try to keep a running track of the performance of these shorts. I suggest just watching them for a while untill you see if it is something that fits your needs. Since these trades move fast you will have to use your own judgment on exit points as the price may move away from target in the time it takes me to post them. Ok...well thats all for now...I hope to find the first one today and post it in real time between 5-6pm.

USO pick of the season

2007-01-05T07:40:00.000-08:00

I wanted to highlight one of the stocks on my buy list displayed on the right hand side of my blog. USO attempts to reflect the changes in percentage terms of the spot price of West Texas Intermediate (“WTI”) light, sweet crude oil. Their portfolio consists of listed crude oil futures contracts and other oil related futures, forwards, and swap contracts.

Why is USO a buy? For one this is the season when no one pays attention to oil. The driving season has long past. The warmer winter and surplus oil has pushed the fund to an all time low. However, the same factors that drove up the funds price last summer will most likely come into play this summer. It would be redundant to rehash all the factors that drove up oil last summer, political, natural, and supply but we have every reason to believe none of those have been eliminated. They are only temporarily out of sight and out of mind.

I expect USO to be relatively flat for a few more months. This is not a short 1-2 month trade. Past performance shows the best time to sell an oil based stock like this is mid to end of summer. Rather than try to time the upswing of USO I would like to start accumulating shares from now until March. I believe under $50 is a good buy. You can view the funds current holdings at their web site http://www.unitedstatesoilfund.com/

Short term plan overview

2007-01-04T07:22:00.000-08:00

I have decided to reduce my long positions to 20%. As many have said I feel after a great run we are going to have a correction. Even in a correction I believe there are a few groups worth owning. I will be continuing to stay long on the Chinese market (CHI, FXI) as well as some choice individual Chinese stocks. I believe IPO's will be profitable day trades even though the recent hype they have received has made it difficult to predict their movement. At this time the majority of my funds are going to be allocated to shorting. I will post one of my shorts per week. Thank you for coming to my new blog site. I hope to provide some meaningful information as the market picks back up from the holidays.

Alien's Stock Blog

2006-12-29T12:26:00.000-08:00

Hi, for thoes who have been following my blog at yahoo I have decided to move it here due to addtional features offered. Since I will be posting a lot more research I wanted to find a site that would accomodate me better. It is a work in progress for now but soon I will have valuable trading information posted here.

I brought over my IPO rating machine

2006-12-11T08:48:00.000-08:00

The IPO rating machine is complete! I built it out of spare blender and car parts. Now it just needs some fine tuning. The first few IPO's to run through it will be test subjects to see if it needs some adjusting. Bascialy the "machine" rates IPO's on a scale of 1 to 10 based on 6 factors. Lastly there is a human element which simply puts a cherry on top, or no cherry on top. Here is our first test subject: GUID
Total score of 6 or above worth a look. 5 million shares: Good float size_____8 The proceeds will be used for general corporate purposes, including working capital, capital expenditures and potential acquisitions of complementary businesses, products and technologies: Good/Average use of procceds_____6 Lead Underwriters: Morgan Stanley, Lehman Brothers, Wachovia Securities: Good/Great underwriters_______8 Financial Highlights: Revenues were $39.4 million for the nine months ended September 30, 2006 compared to $27.2 million for the nine months ended September 30, 2005, an increase of $12.2 million or 44.9%... Cost of revenues was $11.2 million for the nine months ended September 30, 2006 compared to $8.1 million for the nine months ended September 30, 2005, an increase of $3.1 million or 37.9%. Gross profit as a percentage of revenues was 71.6% and 70.2% for the nine months ended September 30, 2006 and 2005, respectively: Financials Average______5 Sector IPO performance:_____7 Priceing: TBD (1 low 5 midrange 8 top of range 10 above range....of course too far above range relative to value will be assesed individualy) Total score without priceing 6.8 Please coment whether you like this IPO or not. Comments will be used to determine cherry or no cherry on top. Results will be tallied the night of priceing.