Interactive Brokers (IBKR): A Solid Value Position
November 4, 2009 · Leave a Comment

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.

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