Middle Class Crunch: As a Wall Street professional, are there any guidelines you follow to jump into some IPOs, or stay away from others?

Ekow Baiden: No big secret here. In my opinion, the best way to make a sound investment decision when buying into an IPO is to use fundamental approach. You want to make sure that you're investing in a solid company that is fairly well-established or poised to grow in the near future. Financial growth and stability is also key.

In other words, you are looking for a company with positively strong cash flow projections, great sales projections, innovative capabilities, a good management team, and a reasonable strategy for growth and expansion. Gather all the information you can, do your due diligence.

Also, consider the company’s brand equity: how does it resonate? This is a strong asset that you should not overlook; you want to invest in a company with great intangible value. MasterCard in 2006 is a good example because it fulfilled all these characteristics.

Middle Class Crunch: What are the red flags you pick on when looking at an IPO?

Ekow Baiden: Personally, a red flag is a company that is over-hyped especially by the media. Even though they may be good investments, you may not get it at a good value since its market price will be run-up by the investment community's hype.

Also, make sure that the company is being audited by a reputable institution. This has been an issue with many small cap companies especially the ADR companies from China and India (ADR stands for American Depositary Receipt, a method of trading non-US stocks on US exchanges).

Middle Class Crunch: Investors remember many recent IPOs such as private equity firm Blackstone Group (BX) and Visa (V)... Retrospectively, what are your thoughts on them?

Ekow Baiden: Blackstone's IPO came with much fanfare but was a bit awkward to me as one wouldn't expect a private equity institution with so much cash to consult the equity markets for capital.

Visa was a good IPO, but was introduced at the wrong time. The 2008 crisis really warped the whole deal. However, I was definitely up for jumping on the Visa IPO bandwagon as their business met my decision making criteria.

Middle Class Crunch: What was your own experience with IPOs?

Ekow Baiden: I have had a fairly good IPO investment experience. Even the ones that didn't go too well were modest losses.

Middle Class Crunch: Speaking of losses, would you advise retail investors to be particularly defensive and set "stop loss" orders on all IPO investments because of their typical shakiness? Or on the contrary would you recommend NOT to use any "stop losses" and just ride through the initial volatility until a price stabilization occurs?

Ekow Baiden: As a retail investor usually with the mindset of buying for the long haul, you'll have to stomach the initial volatility.

However, if in the event of a negative firm specific or major macro economic headline, or for any other reason you get accelerated downside momentum in the stock, you should set up a stop loss to mitigate your losses. Only you know how much loss you can handle: you'll have to use your judgment when deciding where the stop loss should kick in.

Exploiting volatility is an exercise best left to institutional traders (especially high-frequency traders). They typically use stop losses when doing so.

Middle Class Crunch: Tech companies are often held in very high regards by the media and the public. It’s almost as if there were a "post-2k bubble" effect, when everyone feels like trendy companies like Facebook or Linkedin are worth billions, when they could in fact be worth only a fraction of that. How do you see through the fog with tech business IPOs?

Ekow Baiden: I hear what you mean with the tech being over-publicized. But allow me to circle back to the first question to answer this one. As a fundamental investor, I use the same guidelines for all types of investments even the over-hyped tech companies.

Middle Class Crunch: Speaking of Linkedin (LNKD), what’s your take on this recent IPO?

Ekow Baiden: The real question is: have investors been “linked-in or locked-out” of a good deal?

All jokes aside, I don't want to say the “B-word” (bubble), but doesn't it look awkward for a small company with barely any bottom line track record to more than double its value on the first day of its introduction to the public market? Would you call this a hype? I call it, "What the heck is going on?"

To me it’s a very confusing performance considering the type of market we are in. However, let's not be quick to call or compare this to the early 2000's. I definitely don't recommend Linkedin stock for retail investors: it’s too early and too shaky, not for the faint of heart! My take on it: let the day-traders deal with it for the moment.

Ekow Baiden is a hedge fund manager in New York City. Contact him at: www.MoneyHawker.com