Ask Colin

I am considering subscribing for shares in (stock name withheld) that is being floated. How do you analyse such a stock?

As a technical analyst, I need for a stock to begin trading on the ASX before it creates a chart that I can analyse. I tend therefore not to buy stocks in floats.

You will need to analyse it only using fundamentals. The problem will be that the past accounts may be dressed up for the float and the "independent" expert is rarely truly independent in the way that we would usually use the term. The company may or may not make profit forecasts in the prospectus. You should regard such forecasts with great scepticism because many companies in the past have failed to meet their forecasts. You need to be doubly alert to this problem if you suspect that we are fairly late ina bull market or if a baer market has started.

I know nothing about the stock you are asking about. It may be a good business and it may not be. I suggest you approach the whole exercise with a great deal of caution and consider whether, as an unknown quantity, it is as good an investment than a proven company that has been listed a long time.