Whartontown

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    • Mon Dec 17th 16:18 PM | Rating: 0 0
      Commented on:
      Investools: Too Many Accounting Red Flags
      BTW....I and others I am aware of tried to post rebuttals to this 10Q critique on the 10Q blog site, however, Mr. Phillips does not see fit to have any other opinions appear that might disagree with his. That suggests he has some undisclosed agenda or perhaps is working for others who do...very lame IMHO.
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    • Mon Dec 17th 11:39 AM | Rating: 0 0
      Commented on:
      Investools: Too Many Accounting Red Flags
      While I appreciate your stab at analysis, the bulk of it misses, by a wide margin, the efficiency of SWIM's business model. For argument's sake, lets stipulate that the bulk of your apprehension about the education side of the business might be valid (only marginally so IMHO). My own feeling is that when they lowered the cost for the toolbox to $199, they effectively amalgamated the otherwise publicly-available information and repackaged it into something with enough value to make it attractive for a novice with a zeal to learn. I would also add that I'm not at all sure that a recession will hurt this side more(as many otherwise un or under-employed people shift to personal investing and trading), but let's move on with the stipulation that the education biz isn't worth today's stock price.

      What you both miss is that TOS has become one of, if not the best and most preeminent options-centric retail brokerage business' in the industry. They are BARRON'S #1 Options Software platform retail broker for 2007 and with the recent release of their new web-based systems, they might well take #1 in that spot as well in 2008. They've got the largest group of highly active options trading customers (many of them ex floor pros) in the business and their recent DARTS surpassed their competitor OXPS , all without having to severely discount their commissions. They have hockey-stick like growth in nearly every metric,,DARTS, NEW ACCTS, AUM,etc... (they break out fully funded accts, something many of their competitors still don't do!) and are growing at a pace, both mth-to-mth and y-to-y that is faster by multiples over the balance of other publicly held retail brokers. Another salient point is that TOS has the highest customer retention rate in the industry (they lose less than 2% of their accounts on a yearly basis), so they clearly are nurturing their customers and not just just churning commissions!!
      Couple this very strong competitor in the retail brokerage community with the customer acquisition engine (even if it were to be a break-even or slight loss..WHICH IT IS NOT) of Investools, keep your overhead low (which TOS again is among industry leaders, and watch the efficiencies resonate for years to come. Additionally, TOS acquires a significant # of it own new accounts every month with acquisition costs 30% lower than OXPS, SCHW, ETFC, & AMTD. Recent market volatility, while hurting the likes of OXPS, AMTD, & ETFC DARTS, actually benefitted the bulk of the TOS customer base.

      As I am away from my desk and don't have all my valuation #'s with me, I can't do a numerically specific equation for why this stock (just attributing the lion's share of the biz to the TOS side)is no less than fairly valued here, but suffice to say, Mr. Market, many others, and myself all can make that case. My point here is that you spend way too much, and short-sighted, time on the educational end of the business at the risk of ignoring one of the very best publicly-traded retail brokers.

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