Trading stocks versus futures has many advantages, with newly created IPOs presenting some of the best trading opportunities. The sheer number of products available is a big advantage of trading stocks as there are thousands of individual stocks to choose from, compared to only a handful of indexes on futures markets. Many individual stocks have an actionable trading range due to industry or company news, even on days when the overall market is quiet.
There are fewer stocks in the market since the dot-com busts and M&A boom that occurred between 1995 and 2003. During that time period, the number of listed stocks decreased by close to 50%. The market has stabilized since 2003 with about 4100 – 4400 listed stocks on the market. Check out our post “How Long Can the Market Sustain its Low Volatility?” for more information on this and other factors that affect the current low volatility of the market.
The most notable change in listed companies has been the average market cap, which has doubled since 2008. According to a study out of Harvard from earlier in 2017, the average market cap of a US listed company is $7.3 billion, with a median of $832 million. About 140 companies now make up 50% of the total market capitalization. These larger and more stable companies are generally not the domain of traders.
IPOs are Increasing in 2017
Following a similar trend as stocks, IPOs in the US are down from their peak in the 90’s of 677 in 1996 when large numbers of companies went public only to be bought out later or succumb to the bust. During the Great Recession in 2008, IPOs hit an all-time low of just 35, but rebounded to 291 in 2014 with record capital raised of $96 billion.
The last couple of years, however, IPOs have been down with only 112 completed deals in 2016 raising only $21b, although 2017 began to show improvement with 91 completed IPOs in the first half of the year. For a market that has been in rally mode since early 2016, however, even this upswing is not very robust. This leaves stock traders with fewer choices on the exchanges of NYSE and Nasdaq.
Newly created stocks from Initial Public Offerings (IPOs) still present some of the best trading opportunities, especially for traders willing to do some homework.
Great Point Capital is a member of FINRA, serving the trading community since 2001. We offer professional services to traders, including access to Takion trading software. Contact us in our Chicago or Austin office to learn more about how we can successfully trade together with maximum trading performance.
No comments:
Post a Comment