Ameritrade (ATMD) could double in 2 years
The self-directed individual investors have continued to grow. TD Ameritrade (AMTD) targets individual investors that are looking for value trades. The typical customer profile is someone in the early stages of accumulation of assets as well as experienced investors that does not need the expertise of a full brokerage firms. These are cost conscious individual that seek to benefit from low trading cost. Moreover, these are individual that trades more often than the average investors. Fortunately, these targeted customers account for the majority of investors. After watching this stock for almost a year, we believed the time to buy AMTD is finally right. Here are some reasons for our opinion.
Growth of value-conscious investors: We believed the value-conscious investors and traders will continue to seek alternatives to lower bearing deposit products. While the full brokerage firm does provide many services, we believed the self-directed investors will grow much faster; particularly now that these discount brokers continues to offer similar services and tools at a much lower price. Our prediction is the next generation of investors will trade on their own. The availability of financial information will help fuel the growth. The monthly volume of trade continues to show promise.
In contrast, 20 years ago if someone wanted to trade securities, they had no choice but to go through a stock broker that charges large fees. The internet has changed the game by making investors out of people that would not otherwise consider investing in the market. Our view is this trend will continue to grow. As a major player, we believed AMTD is in a nice position to capitalize.
Valuation is currently an opportunity. AMTD has recently consolidated its operations. This in turn has helped reduced the overall expenses. This has been evident in AMTD recent earnings; profit is up and cost is declining. Overall, we believed AMTD will continue to deliver higher future earnings and growth.
We are also optimistic with AMTD stock buybacks. As a result of recent repurchasing of shares, the earnings-per-share growth rate is higher than the overall market. We fully expect investors to eventually recognize this compelling opportunity; the stock is under-valued. Trading in the $17 per share range, we believed it is an opportunity and should yield a solid appreciation in 2007. We see this stock at $25 per share by the end of the year.
