Ameritrade subject of bullish Barron's writeup

While TD Ameritrade (AMTD) has expanded its focus to cater to "mass affluent" investors, 46% of business still comes from trading - a higher percentage than rivals E*Trade (ETFC) or Schwab (SCHW) - and earnings are set to get a boost as retail investors pour back into the stock market.

"When these cycles change ... it's really like a tide coming in," says Bernstein's Brad Hintz, who recently upgraded the stock. "With fixed costs already covered, margins pop. And the cycle lasts years, not months."

Rising interest rates could also give the whole industry a boost, and Ameritrade - holding $96B in rate-sensitive assets for clients - could see EPS climb $0.36 in the first  year after a 100 basis points rise in rates (fiscal 14 EPS is expected to be $1.44).

Among the roadblocks is the boosted scrutiny over HFT following the release of the Michael Lewis book. Ameritrade doesn't disclose how much revenue it gets from payment for order flow, but analysts peg it about a mid-single digit percentage of revenue and mid-teens percentage of profits. Ameritrade argues the practice helps lower trading costs and improves execution fees, and analysts say the practice is unlikely to be completely eliminated. AMTD's stock is off about 12% since the book came out, about the same as E*Trade, but less than Schwab.

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Comments (4)
  • Archman Investor
    , contributor
    Comments (3383) | Send Message
    "mass affluent" investors......LOL.


    I'm sorry I must have missed the part of our country where all these masses reside.


    53.17% of all $$ earners in our country earn $30K/ year or less. (Pretax)
    (Thanks SS admin. for that data)
    As a matter of fact 82.% of ALL $$ earners in the US earn $65K / year or less annually (pretax).


    The average liquid net worth of most Americans is less than $20K (if that).


    I'm sorry we were talking about "mass affluent"........Yeah sure.
    17 May 2014, 09:23 AM Reply Like
  • Charles A. Smith
    , contributor
    Comments (1292) | Send Message
    "Ameritrade doesn't disclose how much revenue it gets from payment for order flow...Ameritrade argues the practice helps lower trading costs and improves execution fees."


    Laughable. Retail orders are the "grist" for the trading mills (algorithms) run by the HFTs, exchanges and dark pools. If PFOF is such a good thing, why is it outlawed in Canada and Australia?
    17 May 2014, 09:43 AM Reply Like
  • dclaudew
    , contributor
    Comments (86) | Send Message
    If you click on "Buy" or "Sell" at AMTD, the price is self populated. You don't have to accept that price. Just type in the price you want. You do have to look at the volume for the stock symbols that end in funny letters like Y, so if the volume is low for the day, click on "AON" for all or none; this will avoid the problem of having to pay two commissions if your trade extends over more than one day. If the stock symbol is from NYSE, S&P 500, NASDAQ 100, or a billion-dollar ETF, volume is unlikely to be a problem.


    I'm guilty of extra trading in 2014. It seems to me that stock picking makes a difference this year, and that good, low-PE stocks are not highly correlated with junk. AMTD has a lot of useful metrics to help decide which stocks to jettison or which to buy (eg, PE, price to book, price to sales, news, charts, earnings history, and Analyst Opinions with a skeptical grain of salt).


    Lastly, so what how many trades you make at $10 each, or $20 round trip? Compare that trading cost to the 1% annual fee that AMTD wants you to pay for one of their pesky advisors. The tiny $10 fee is like the zinc coins you get in change — not worth the time to count. You shouldn't be doing much trading anyway.
    17 May 2014, 01:28 PM Reply Like
  • primo39
    , contributor
    Comments (7) | Send Message
    Watch schwab:
    they cash your check before you are out the door or sooner.
    However,watch your transaction history as they take 2-3 days to post your dividends excluding weekends. When asked about this process,you get a variety of answers. I emailed SEC 3x over the years and am still waiting for a reply.
    17 May 2014, 01:51 PM Reply Like
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