Mike Arnold
Long only, small-cap, tech, growth at reasonable price

Has The Alpha In Interactive Brokers Shares' Evaporated?

I wrote in September that I believed shares of Interactive Brokers (NASDAQ:IBKR) ("IB") were undervalued given the growth profile and high-margin nature of its brokerage business, and the possibility of the company winding down its market making business and returning capital to shareholders. Since that narrative, shares have risen 25% relative to the 8.5% appreciation in the S&P 500 Index, providing investors with nearly 17% of "alpha" in just over 3 months' time.

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Given the company traded up to the price range I estimated to be fair value, it is worth revisiting the IB investment thesis.

The Business

IB owns a 12.4% interest (as of September 30) in IBG, LLC, the holding company for two...

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