Interactive Brokers Group, Inc. (IBKR)

If you read the press release for this company on October 22, the headline stated “Interactive Broker’s Q3 Profit lags Wall Street Estimates”. The fallout was immediate and painful, the stock fell from around $20 to $16, or 20%. The message to all investors was clear- “Get out now!” It’s a well known fact on the Street that companies’ stocks get punished when they fall short of estimates…

However, you and I are not part of the Street. We are outsiders, feeding on the crumbs of the institutions and the Goldman Sachs-caliber traders of the world. When they throw us a bone, we take it.

The Pitch:

Watch CNBC for a while and you see Interactive Brokers commercials all the time. They are one of many online market makers/brokers that allow us to trade and invest. Some investors might be scared away from this stock, thinking that due to the crisis people will shy away from investing and trading. If you think, as I do, that investing and trading will continue in the future as more and more people jump in the market, this is a great choice. It seems that they have decent management, and I don’t see any excessive risk taking (such as the subprime loans Etrade is working through) that should be a concern.

IBKR is trading at just 1.18 x book value and 12.53 x earnings. Those earnings are considerably down from late 2007/2008. Insider ownership is 95%, meaning a lot of people on the inside want this business to do well just as we do.

Bottom Line: If you are looking for a solid, conservative value play to hold for a few years, IBKR is a great fit in my opinion. Let Wall Street’s dumb reactions work for you, and buy this stock while it’s down. If the stock run’s significantly ahead of itself in the future or reaches it’s previous highs of $30-$35, I’d reevaluate my position. Buy Below $17 and hopefully a few down days might give you a better price to average in.

Disclosure: I am long IBKR @ 15.95. I am not a financial advisor and the above is solely my opinion, NOT advice. Do your own research and contact a financial professional for help if necessary. My opinions do not take into account your specific situations or needs.

Poor results will keep this one down for a few months.

Everything about this company and stock says value. As far as i can tel the earnings disappointment is just a buying opportunity.

Last nights report was not very inspiring. The way I interpret it is that the markets are more effiecient but we aren't

They have two lines of business: brokerage and option market making. Both are doing great. They have doubled revenue in the past three years. While Lehman Brothers were going bankcrupt last year, they were advertising heavily, taking advantage of the moment. Stock valuation is also great, trading at less than 10 times EPS for 2008. Their margins are also amazing, but that's not obvious if you look at the income statement, because of an accounting rule. They have a 10% free float, but still consider the other 90% as a minority interest, so they report 100% of the revenue, 100% of the profit, but then decrease the profit by 90% - the minority interest.
Hence if you normalize the income statement the net margin is 10 times bigger than in the initial income statement. This stock in my opinion has the beautiful combination of low valuation and big revenue and profit growth. I would like to own this stock for years.

Positive outlook on future performance. This market is only going to increase in coming years.

This stock is at an excellent valuation. They seem to be well poised to take advantage of the recovery and upswing.

Solid growth company, market leaders...

With news sources starting to pronounce the possible beginning of a recovery underway, people are going to start feeling better about investing in the market again to recover some of their next egg back. Interactive is poised to take advantage of this nicely.

overexposure on Fool.com

good value

Moving up

I recently opened an account with interactive and everything I see is top notch compared to the 4 other stock and option accounts I currently have.
Their ultra low commisions are what attracted me and I will trade much more frequently because of it.
From the stats I've seen on IBKR, this is where the frequent traders trade. When trading volume returns to normal, this company can go nowhere but up.

Great company. Has a great business model and low cost provider. I can see this going big

IBKR will rebound with the rest of the economy and the financial sector. Recent weakness provides a great time to get in, and their platform and solid balance sheet provide great long-term stability while waiting for the tide to turn.

The internet and low-cost brokers have opened the world of stock market investing up to everyone, to the extent that we now take for granted something that only a couple of decades ago only the very few had access to. And the use of more exotic trading methods (shorting, options etc) is becoming more popular as well, as people start to explore and understand how to use them. I can't see that trend reversing, and my guess is that if we enter a period of anemic economic (and market?) growth as we struggle out of the global recession this could actually benefit any company that specialises in options trading, as people start to believe that "old style" investing (find a good company that you believe will grow, then invest your money and wait several years for the price to go up) no longer does the trick. Personally I disagree with that (I'm a long-term buy to hold type and have little interest in options trading) but I think it's a trend that will grow and I guess this is my way of making money out of options!

Recommended by Motley Fool.com

I've been a IBKR customer for a few months now and I see tremendous potential for growth. Although their marketing is targeted toward traders, IKBR actually offers an excellent value for small investors, and IRA investors in particular. Their ultra-low transaction cost structure ($1each for small stock trades, minimum 10 per month) offers me much more flexibility for my two year-old IRA than I would have with any other broker. Because annual IRA contributions are limited by the IRS, having such a low cost per trade makes it easy to take profits when desired and keep an optimal level of cash available to take advantage of new buying opportunities in a highly volatile market.

One significant negative is that the IKBR user interface currently isn't very user-friendly. That is a serious impediment to adding large numbers of unsophisticated investors, but redesigning the interface shouldn't be an impossibly difficult task.

When more folks begin to realize - hopefully with the help of much better IKBR marketing - that you don't need to be a day trader to benefit from such a low cost per trade, I see a huge upside potential for the company. Even without that paradigm change, it still looks like a very good company as-is.

good brokerage with a growing customer base. it has a strong foot print in Asia and Europe too. as the recession wears off, people will start trading actively and this will help the company grow its revenue. it is still reasonably near its 52 week lows and hence a very good time to get in.