The Secret Way to Profit From the “Rich Man’s Market”

20 | By Michael A. Robinson

We’ve talked a lot over the last few months about identifying stocks that can double your money.

And I’ve demonstrated strategies that will help you magnify your net worth.

But today I want to tell you about a segment of the market that is absolutely on fire – and that, with the right scenario, can score you gains of as much as 30%, 40%, 60% or more … in a single day.

The heavyweights on Wall Street usually reserve these hefty profit plays for their very best customers – the wealthy elite who already have big money.

But that doesn’t mean that you’re locked out.

So I’m going to share my four rules for pursuing these gargantuan gains.

And then I’m going to show you the single simple investment that will let you circumvent Wall Street’s roadblocks – and allow you to grab a share of those windfall returns for yourself.

Consider it a “secret passageway” to the tech-stock sector’s biggest profit machine – something I often refer to as the “rich man’s stock market.

A Very Special Situation

If you’ve been a member of the Strategic Tech Investor subscriber circle for any length of time, you know my mantra is “the road to wealth is paved by tech.” And you’re also aware of my five-part strategy for creating wealth through tech investing.

The goal of those five rules is to uncover tech stocks and other tech-related investments with double-your-money profit potential.

I’ve also showed you some other pathways to profit. In fact, as part of this journey we’ve been taking together, I’ve also shared some “special situations” that offer sizzling profits.

As that term implies, special situations are just that – special. That means they don’t come along as frequently as conventional stock investments.

Today I’m going to tell you about another one. And I might even label this as “very-special-situation” investing – with good reason.

The profits, you see, can be massive.

This slice of the tech market can make you lots of money. And it’s also a vital catalyst of the tech-sector rally we’ve been seeing. In fact, it’s also part of what’s been driving the overall U.S. stock market to the extraordinary new highs we’ve seen this year.

If you’ve seen all the exciting new stock issues hitting the market, then you know what I’m referring to.

The technical term for this is “initial public offerings.” But most investment pros – and other seasoned investors – simply refer to them as IPOs.

IPO investing can be a daunting process. Because Wall Street tends to reserve the hottest issues for its “best” customers – the “ultimate insiders” of the U.S. financial markets – IPO deals can be tough for retail investors to get into. In fact, colleagues here at Money Map Press have heard me describe it as a “rich man’s stock market.”

And even if you do manage to get a few shares, there are still difficult decisions to make – such as how long you should hold on, or under what circumstances you should sell.

To profit – and win – in the IPO market, you need a strategy.

And that’s just what “Robinson’s Rules for IPO Investing” give you. In fact, the four rules that I’ve created tell you to:

  1. Know the Market.
  2. Put Facts Before Hype.
  3. Always Use a Limit Order.
  4. And Never Chase an IPO.

Let’s take a look at the IPO market itself. I’ll explain each of my four rules to you. And we’ll round this out with the one investment you can make right now that will allow you to capitalize on this massive opportunity – while also managing your risk in a way that no other IPO opportunity can.

Feeding the Animal

Since I’ve been around Silicon Valley for nearly 30 years, paying attention to IPOs comes naturally. Over the years, I have worked as a strategic consultant to many IPO-minded startups.

A lot of folks view tech stocks as a form of “casino capitalism,” and grouse that they’re nothing more than another Wall Street gambit that’s designed to separate foolish investors from their hard-earned money.

But that’s actually not true.

In fact, the stock market actually needs new tech-stock issues. Like all capital markets, the stock market is a hungry animal with a big appetite.

It needs to be fed to stay healthy …

Here’s why.

With the market hitting several new highs recently, a lot of my investing friends want to know how long the bull market will last. The answer is easy – as long as fresh cash keeps flowing in.

And that “new money” has to come from somewhere.

That’s why high-tech IPOs are vital for a healthy market. They represent breakthrough technology that excited investors are willing to back with billions in new cash.

Thus, one of the “vital signs” of a healthy bull market is an energetic IPO market.

In this regard, we are in great shape. Of the 13 IPOs set to hit the market in the next few days, nearly half are technology related, including biotech.

And that’s not all. A new survey by global consulting firm PwC shows that IPOs soared in this year’s second quarter. The April-to-June period saw 62 IPOs – an increase of 88% from the year-ago period.

Those new second-quarter stocks raised a total of $13.1 billion, up 111% from the same period in 2012, PwC said. Those statistics take out the huge impact of Facebook Inc. (NasdaqGS: FB), which raised $16 billion when it went public in May 2012.

A Piece of the Action

Let me be blunt. The IPO market can be a jungle, meaning IPO investing is not for the faint of heart. Yes, you can make a lot of money. But if you don’t know what you’re doing, you can get your head handed to you. And high-net-worth insiders have a big advantage: They get access to all the best deals, making it very tough for retail players to profit.

That’s why I created “Robinson’s Rules for IPO Investing” – which you can view as a survival guide for this high-energy/high-profit-potential slice of the overall stock market.

So let’s talk about my four rules right now.

  1. Know the Market: This is a key fact you must commit to memory – that determining the “true value” of many high-tech IPOs is as much an art as it is a science. Many of these firms are on hyper-growth curves. But their current sales-and-profit outlooks can vary widely. If you know the market the companies are involved in – mobile-tech, cancer drugs, or software-as-a-service (SaaS), for instance – you can get a good sense of how the competition stacks up, and how IPOs of peer companies have done. This at least gives you a ballpark feel for what the IPO’s “fair” price range should be.
  2. Put Facts Before Hype: The best IPOs are almost always accompanied by a lot of pre-deal hype. Too many investors hear of a “hot IPO” and try to get in on the action – without doing any homework at all. That’s a recipe for a hefty loss. You need to do the basic research. Start by visiting the company’s website to get an overview of the business. Look at management, recent customer wins, recent awards and news. You can also find information on financial websites about its key competitors and how they’re doing. Check out solid news sources such as, Bloomberg News and one or two other reputable news sites. This will give you a sense of how the stock will be priced, what the post-IPO demand looks like, and what the company’s prospects look like going forward.
  3. Always Use a Limit Order: Unless you’re an insider, or are a high-net-worth investor, it’s going to be tough to actually get shares of the best IPO deals before they trade in the aftermarket – which is when any investor can buy them. Too many investors try to make up for that by purchasing the stock as soon as it begins to trade as a newly public venture. Even worse, some put in an order shortly before the stock begins trading in order to buy “at the market” after it does. But this approach exposes you to a massive risk and could leave you holding the bag. If the stock opens up 50% you will very likely pay that price. If the stock then fades by half and closes its first day of trading with a 25% gain, you’ll have been killed – even as Wall Street celebrates the “wildly successful” IPO deal. That why I tell investors to put in a “limit order” that’s absolutely no more than 10% higher than the offering price. To me, that’s a reasonable premium. More than that is asking for trouble.
  4. Never Chase an IPO: This is an important follow-on to Rules No. 2 and 3. Over the years, I’ve seen too many investors hear about a big pop for a new issue and then go chasing those gains. But remember, the pre-IPO “insiders” very often want to sell into the rally. You don’t want to become the person who buys at the top. In the long run, you’ll do much better letting that stock go and looking for another more-viable play.

Having read this, I’m betting many of you might want to avoid IPOs completely – either because you think the field is too risky or don’t have the time to do your homework.

Don’t make that mistake.

You see, we’ve found a great way for you to get a “piece of the action.”

The IPO Play to Make Right Now

The investment we uncovered is a great way to profit from the IPO market. You don’t have to be an insider. You don’t have to worry about emotions leading to bad decision-making. And, best of all, this investment is a market-beater: It’s already up 46% over the past year, roughly double the return of the Standard & Poor’s 500 Index.

The First Trust IPOX-100 Index Fund (NYSE: FPX) is an exchange-traded fund (ETF) focused on IPOs.

Strictly speaking, it doesn’t focus exclusively on high tech – the fund seeks to mirror the broad market for new stocks across all sectors.

But that’s okay: As a broad play on new issues (IPOs), about a third of the fund’s holdings will be in tech and health-care.

In that regard, think of this as a “twofer. You get both hot new tech and broad diversification. FPX holds positions in finance, auto, retail, heavy industry, energy and a smattering of metals.

All that and it trades at roughly $38 a share.

I can hear what some of you are thinking: “Ugh, it’s an ETF.”

It is, but it’s actually a much-more complex financial instrument than the run-of-the-mill ETF.

In fact, that’s one of the things I most like about this profit play.

As you know, I’m a big fan of rules-based investing – if only because it defines your strategy and creates a structured discipline, or methodology, that makes you decisive and helps squeeze emotions out of the investing equation.

The managers of FPX describe the fund as being “rules-based.” The fund only invests in a stock after doing a thorough review of the underlying company’s financials. And it sells each stock after holding it for 1,000 days.

By definition it doesn’t invest heavily in the sexiest small and micro-cap firms. Instead, it is weighted toward mid-caps with an average market value of roughly $3.3 billion.

These are firms still small enough to offer solid upside … but large enough to avoid the potentially stratospheric volatility of more-thinly traded stocks.

This is the easiest way I know of to get in on the white-hot market for IPOs. It will save you a lot of time, energy and worry.

And I believe it will make you a lot of money, helping you build your net worth so that you can live the life of your dreams.

And once that happens, Wall Street investment banks will be coming to you … recognizing that you’re now a high-net-worth investor, and begging you to take a piece of their best deals.

But you’ll no longer have to …

[Editor’s Note: Your feedback is very important. As always, I welcome your comments, questions, suggestions, and opinions. Post a comment below … I look forward to hearing from you.]

20 Responses to The Secret Way to Profit From the “Rich Man’s Market”

  1. Eileen Davies says:

    Hello. Thank you for your recommendation. I wonder if it is worth waiting a day or two before going in? I am going to watch it for a day or two and then move.
    I enjoy your emails and articles.
    Best wishes
    Eileen Davies

    • Michael Robinson says:

      Hi Eileen,

      Thanks for taking the time to write to me. I got a similar comment from another reader. There’s no way to perfectly time the market. However, lots of investors will study a position for a bit before moving in. So, there’s certainly nothing wrong with waiting a bit. On the other hand, another approach is to buy test shares, putting in just a small amount and watching the position for a few trading sessions before investing the full amount you had set aside. It’s just another tool for you to consider. Hope that helps.



  2. nicholas kitt says:

    Dear Michael,
    I have quite a few of ETF’S with Vanguard…so I’m not adverse to Index funds, right now I’m invested to the hilt,but FPX really appeals to me
    of something I’d like to invest in,in the near future. The economy is very shaky
    and with so much going on this week with the Fed,I have a wait and see attitude.
    Thanking you,
    Nicholas A.Kitt

  3. john rich says:

    And once that happens, Wall Street investment banks will be coming to you … recognizing that you’re now a high-net-worth investor, and begging you to take a piece of their best deals.

    Statements like the one above excerpted from the article just shout “con man”. Investing is not a get rich quick operation. Most people who approach it that way end up being swindled or losing their money on risky investments.

    • Michael Robinson says:

      Hi John,

      I’m not sure what you mean about the “con man” comment but let me share a unique perspective with you. I have a friend who, through years of investing, became a bona fide high net worth investor. He’s now a leading “insider” who regularly gets call from CFOs letting him know of new stocks, usually long before the shares become public.

      I was at an investment conference with him that featured a lot of companies giving presentations. The guy could hardly get through a room without industry leaders coming up to say hello and chat with him. As far as I know, my friend is any thing but a “con man.” But he is wealthy. Hope that perspective helps.



    • Michael Robinson says:

      Hi Walter,

      Thanks for taking the time to write to me. I welcome you comments. Now then, getting involved is pretty straight forward, if you have an online brokerage account, you simply put in an order that way. If not, then phone your broker and give the rep the ticker symbol and the number of shares you’d like to by. They’ll take it from there. Hope that helps.



  4. Sally Maine says:

    Very interesting article. I didn’t know anything like FPX existed. Thank you for the information.

  5. Joe "JD" Merritt says:

    Dear Michael, When another advisory from you arrives on my screen I “gird my loins” for more knowledge and adventure. Your writing makes me envious. When I was re-writing my own book, “Adapt Or Die,” for the 3rd time, I really needed a genius like you to help me.

    Thank you, my friend. I’d like to share some of the knowledge gained during my 94 years and perhaps a bit of the succeses in living and business, starting with my 1st wildly successful business established at age ten.

    Just think, Mike, my Father was born, the youngest of 12 children, in 1877 and had to go to work after the 3rd Grade. HLis Dad, my Grandad, Josep, had been killed in a farm accident.

    With that abbeviated education, my Dad was the smartest man I ever knew.

    • Michael Robinson says:

      Hi Joe,

      Thanks for taking the time to write to me and for the nice comments. That’s an amazing story about your childhood and life experiences. I appreciate your sharing it with me. More than just about any one out there, you see what an amazing time we’re living in, at least from the perspective of all the great high tech and biotech breakthroughs we’ve seen. Good luck with all your investing.



  6. Don Barrett says:


    I pick my analysts very carefully, and you are one of the best. Thanks for fantastic tips like FPX; they are worth their weight in (Pick your commodity).
    Many thanks.

  7. Maggi says:

    Michael, thanks for your great info! It’s certainly something to think about. I’m very interested in tech and bio-tech and you’ve taught us all a lot. The depth of your research is impressive in all your articles.
    Your comment at the end of the article about “Wall Street investment banks will be coming to you” is taken as a whimsical pipe dream . . . I like your sense of humor! I’d just be happy making a nice profit.

  8. dan banago says:

    Hello Michael, Everytime you write something, sounds so good and so true that makes me read further until the end of the article. Thank you so much for being so positive about the future. I wish that it will really change my life by investing to this ETF.

  9. kinneyjeff says:

    I should be asleep ready for the AM Bell, but I truly appreciate your concise and adroit manner with which you present your ideas devoid of unnecessary copy.
    I have acted on several of your simple ideas. Thanks

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