The Lifecycle Trade -- Book Review

Alright! I got my copy of the "Lifecycle Trade" How to Win At trading IPos and Super Growth Stocks. As many know, IPOs has been a topic that I have extensively researched. So I was excited to see how the book would compare to my own findings.




Overview.

The book is short--its only about 100 pages but it is a good resource.  It went over 1,679 stocks and categorized them into six categories:

1. Late Bloomer
2. Pump and Dump
3. One- Hit Wonder
4. Rocket Ships
5. Stair Stepper 
6. and Disappointments. 

The books then categorizes the different phases:

IPO - Advance Phase

Institutional Due Diligence

Institutional Advance Phase.

I've  personally talked about the phases as "Infant" and "Toddlers."  Infants can make big runs but they are not sustainable: TLRY  ACIA, SHAK, GPRO. Toddlers make the most epic moves. ESPR, AAXN (TASR) and become true market leaders.. 

Praise & Criticisms

One of the stated goals of the authors of the book was to find the "next Amazon."  I think that misses the point of IPO trading.  An Amazon is a 1 in a 5,000 stock and its not necessarily the best buy point to get it right from the IPO breakout move and ride it forever. -- AMZN had a 90% drawdown from 2000 -2001  The buy/sell rules aren't necessarily that effective for the majority of IPO trades and there is a lot of survivorship basis. Can you ride out a 50% drawdown? I'm not interested in trying.  Also, hundreds of IPOs have either gone belly-up or have gotten bought out. 

The book has some very nice chart examples of the different phases and provides nicely written explanations of the different characteristics of IPOs.  Some of the Stats were particularly interesting 20% of IPOs. Within a year 20% of IPOs will make a 100% run.  While a 100% is a great goal, 80% don't get there so are they worth trading?  My research shows that 80% will make at least a 30%+ run which is pretty easy to identify when it its coming and that, in my opinion, is the advantage of IPOs

 I agree with their conclusion that buying on the IPO day is a not a good strategy. 

Point being, I think you need to have different "trigger" rules for different phases. Until an IPO has gone through a basing pattern or wipeout its not a long term hold.   The institutional Mark they talk about is very real, but it generally occurs past the point where I would call a stock an IPO.  -- and the True Market Leaders will tell you who they are by the volume pattern.   There will be many, many other buy points in a TML that aren't necessarily as what I would call an IPO.

The trade examples and Q and A were very good.  The Authors point out trades they mismanaged as well as ones they got right.  

Recommendation

Buy it. -- its a great little resource to provide a framework for the various stages. 

That said, the book is a good resource but no substitute for going through the charts one-by-one and noting buy points. -- that's the only way to really gain conviction.