Benjamin Borden's "Best Canadian Stocks"

For those of you who don’t know, the Athabasca Oil Sands (ATH.TO) IPO was the biggest in Canada since 1999.

It’s also been, up to now, the biggest flop for Canadian retail investors in recent memory.

But this should not necessarily come as a surprise. Retail investors are often subject to collateral damage by the investment “industry”. In fact the ATH IPO was a big payday for some.

Now I’m not trying to get all righteous here. The investment game is a game for big boys. If you’re going to play you have to accept that you might get hurt. But that doesn’t mean you can’t trade smarter, eh? Retail investors could have realized one simple fact: the underwriters and the army of investment advisers expect a “cut” for putting the deal together. And they should get something for their efforts. But the cut on these sorts of things can often be upwards of 20%. Since this is basically a holding company with no cashflow, a concomitant drop in share value relative to the damage done to the balance sheet as of day one should have been factored somewhere into the risk profile.

And lo and behold look how the stock fell quickly to the $14-$15 level and hung there for a few weeks – roughly a 20% drop. Now this level might have held, but as luck would have it the stock subsequently dropped further to around the $10 level – probably due to the uncanny and unfortunate decision to debut during a significant general stock market pullback. Yuck.

I’m sure many disgusted retail investors packed it in at this point and sold out their positions.

And this is why I think NOW is the time to get in on the Athabasca Oil Sands IPO! Although there is not yet much data to go by, you can see in the graph below that the stock appears to have hit a hard bottom around $10 and is now consolidating making higher highs and higher lows bracketed by the $11 mark.

If I weren’t fully deployed right now I would set aside a block and put in a buy stop around $11.40 to catch a potential breakout. And if the breakout did not appear, I would stalk the buy stop down to $10 to catch a potential bounce higher off this lower boundary.

Who knows, I might even sell out of an existing position to get into this trade. After all, unlike many IPOs, this company actually has real assets of real value. Could even be a good long-term hold.

ATH, just please don’t do another IPO .

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