E*TRADE Financial Corporation (NASDAQ:ETFC)

Not that these bankers actually know any more than the rest of us, but the ETFC CEO, who was Vice Chair of JP Morgan, requested that all of his 2008 and 2009 incentive compensation for ETFC be in the form of equity. Whether he is right or wrong in this case is yet to be seen, but you can be certain he has better insight into the company than any Fool here, has 30 years in banking, and has proven he knows how to make himself rich.

On one hand, equity-based compensation can be lauded as selfless and benevolent behavior toward a cash-strapped company down on its sub-prime luck. But on the other hand, I see it as someone acting exactly in line with market incentives. If he interpreted the risks correctly, I reckon he stands to make many tens of millions (and have a hero's legacy) if he does his job right, and that's far more than any salary they could give him. Steve Jobs showed up at a company a few years back and did something similar, I believe.

Think of what it would take for you to show up at a 20-yr-old beleaguered company and, after looking through their books and talking to all your expert colleagues and advisors, decide to bookend your long and notable career by working around the clock for two straight years for no salary when you are already wealthy.

I'm going through my picks and updating them (since I didn't both to even write a pitch on some of them). So, here it is (basing it off of a post on the SA boards):

Etrade - I love it, and have found customer service to be great. I think Etrade has a great trading platform.

Now the question is whether Etrade is a good investment. At these prices, you can't argue that there wouldn't be a tremendous upside if Etrade recovers. So far, they've managed to pull it all together. Etrade was an early warning sign of all this mess, and have been busy selling off assets and attempting to right themselves (take a look at their financial statements and news since the end of 07 forward). My opinion - first in, first out...but it will be a risk.

As everyone already knows, all of Etrade's problems come from the banking side.

I had recently read an article on the Fool regarding Etrade as a buyout opportunity. I believe that is true. Etrade makes a great asset play. Their customer accounts continue to show a strong increase, and their brand name is strong. Now, that being said, I'm sure that many stockholders would not be pleased with a low $5 buyout (although it would make new holders VERY pleased).

What would make more sense to me (and this is just rampant speculation here) is for Etrade to spin off the banking portion of the company and sell that off (which will come with any TARP money that it receives), resolve their outstanding debts, and get back to their core competency - being an online broker. In fact, I already have someone in mind - GS. They have already announced their intent to get into online banking, and Etrade already has the platform.

Alright...all of that being said, here is what I'd say - If you invest in Etrade, you're investing in a financial company that has risk associated with it. It is a borderline speculative trade. If you believe that they'll be able to resolve their problems, then there is nothing but tremendous upside for this stock in the long term - easily a 10 bagger. On the flip side, the worst case scenario is to restructure or go bankrupt (although I believe they would look for a buyout before that happened). In that case, you don't have far to fall...they're currently just above a dollar.

Well below what it is worth.

Either by acquisition or rebound, ETFC will make its comeback!

The company will announce its approval of some bailout money from Uncle Sam and it will continue to gather new accounts and revenue from its brokerage activities. The mortgage losses are going away slowly but surely.

Undervalued. Honestly, in the case of this stock, enough said.

mreits will not be a problem for more then a few more years, this one is way oversold.

E*Trade has been badly beaten down like other financials but they have unloaded most of the exotic products that pushed financials into the current crises. Furthermore, now that the market has lost 40% of its value many stocks are screaming buys right now and that will likely encourage new investors and others that stayed on the sidelines to jump back in.

Keep in mind that E*Trade was rated the #1 online broker by Smart Money Magazine for 2008 and the company continues to improve its trading features and services. That's why I continue to use them to build up my protfolio though they may charge more than other competitors such as TD Ameritrade. They continue to remain ahead of the curve in many respects.

Lastly, historically after presedential elections people regain confidence and markets improve. I'm certain that will be the case this year and E*Trade will ride that wave followed by another wave when the financial sectors do improve.

ETFC has been quietly performing a solid recovery while accelerating its core business (online brokerage) over its peers. It has been building its cash balance and provisions against its mortgage porfolio while its mortgage portfolio is performing better than most others in the business. They are next month going to retire $450 in Debt for a mere $50 Million in equities and reported last Quarter CC that its losses in HELOCs appears to have peaked as well as its provisioning efforts. Currently, ETFC has almost no 2007 vintage HELOCS and its 2006 HELOCs are performing better again than its peers. They have reduced their open HELOCs from $7 B down to $3 B and none of those are late payment or delinquent. Their brokerage is No. 1 in the online investment industry and all points to a profitable quarter the 1QTR of 2009. Everything is lining up and not even their arch enemy Citigroup (Bhatia Analyst) is able to sink their ship. Short interest has decreased from 127 million shares + or 24% of outstanding shares to 80 million or 15% of outstanding shares. Those clients with Etrade are extremely loyal and many own significant stock in the company. All points to very successful growth in PPS over the next two year and beyond.

Once out of white waters in 2010, this stock with be unhindered in its forward momentum

IF etfc can weather the storm...

got to get better, layton is a old slow goat that will reach the top some day

Capital has been destroyed, but they will emerge as a leader in the next boom. OR, they will be bought by the likes of USB.

Acquistion target as lower retail activity will force another round of consolidation

The company appears to be making a transition back towards profitability. IMHO, the company can return to being a leader in its sector in 2 - 3 years.

ETFC has set it's self up well for the current economic environement. Management has picked up huge amounts of stock and has also shed many bady assests. High volume in current markets also creates the probability of higher revenue from investment services.

E*Trade has no peers when it comes to the "trading platform" - it is their crown jewel. No other online brokerage comes close in the ease and richness of the platform. If E*Trade continues to innovate and doesn't make any more bad investments, they will continue to gain customers and market share. Their biggest challenge is convincing people that their money is safe in E*Trade accounts...

top platform in electronic stock trading. showed extraordinary resilience to rise from the brink of bankruptcy and made significant moves before sub-prime really hit the fan making their supposedly fire-sale transactions look like a win. It is now completely focused on its main electronic brokerage platform and should help it regain its footing and perhaps, a leadership position

Getting back to it's core operations, this could easily be a 5 bagger.