Entering text into the input field will update the search result below

Flow Traders Is A Lifeboat On Sale

Mar. 11, 2020 9:15 AM ETFlow Traders Ltd. (FLTLF)SVXY, VIXY18 Comments
Robbert Manders profile picture
Robbert Manders


  • Flow Traders profits heavily from current volatile markets.
  • Investors should expect Flow's best quarterly EPS in 2 years.
  • The stock's performance has been moderate YTD.
  • Though there are fundamental issues with the stock, there is enough option value in it for me to see 35% upside.

The current market is the most volatile one we have seen in a long time. Last Monday was perhaps the most volatile day since 2008. Flow Traders (FLTDF) just happens to be a company that profits from market volatility. You can find my first article on the company here, which provides important details about its business model. Basically the company makes money from making (ETF) markets and ETF arbitrage strategies by its traders. The YTD stock chart below only lifts a corner of the veil as market volatility is the sole reason of existence of this company.

Flow Traders stock performance YTD. Source: WSJ.com

In my last article, my thesis was that market volatility was the big reason to own Flow Traders at all. If markets stay calm forever, the company would maybe make an EPS of EUR 1 per year every year. That one euro per share doesn’t make the stock an attractive buy in its recent trading range of EUR 20 to 25 per share. The fact is that the stock has not performed well at all over the past year. But it is not just last year: the stock has seen a poor three years. Both the end of 2017 and 2019 saw calm markets and both times it had a profound impact on the stock.

The chart below shows an upturn in February 2018 in which the company disclosed at its Q4 release that it already made more money than in the full year of 2017. The EPS of Q1 2018 was EUR 2.36, but is generally regarded as a one-off because VIX ETFs (VIXY) (SVXY) were a special action arena by themselves in which Flow made a tremendous amount of money. Evidence of this was that NTI or Net Trading Income in Europe

This article was written by

Robbert Manders profile picture
Currently work at a HF so won't be actively contributing in the near future. Besides being a fundamental value investor, I have a master's degree in Finance, have been investing myself for over 10 years, and have equity analyst experience at a top Dutch buy-side institution. I live in the Netherlands and will share my European perspective on stocks worldwide.

Analyst’s Disclosure: I am/we are long FLOW TRADERS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (18)

Robbert Manders profile picture
Flow bears at UBS upgraded the company to neutral and expect an EPS of €2.36 in 2020.
Robbert Manders profile picture
Unless flow books a negative EPS of 3.35 over the next 3 quarters, the estimate above by UBS will be too conservative. Flow just published a blow out quarter with an EPS of 5.71 while the stock trades at EUR 31...
Whats your price target now and how does it compare with Virtu? Virtus EPS is lower but does seem to have the better long term prospects of the two and is more likely to grow. Its also more diverse post recent mergers so I would expect to see better returns on lower vol.
Robbert Manders profile picture
EUR 35. Flow is obviously the beta play here. Virtu is a stock you should if you like it fundamentally, but Flow is better market crash insurance. Flow's 'earnings beta' to the VIX is much higher.
Robbe Delaet profile picture
Well-written article. Agree with most of it. One point: I think including the average intra-day % move is much more viable than using the average daily move of indices. Flow traders makes money from huge intra-day swings, which is not allways correlated with high daily moves.
I will cover Flow traders next week by doing a regression analysis and trying to predict Q1 earnings with it. At the first look, NTI will probably be somewhere between 150 and 200mln.
Robbert Manders profile picture
My latest Q1 NTI estimate is EUR 215m. I agree that intraday swings are very important and I track it. I just didn't find a better correlation between it and NTI or margin than other datapoints.
katzenzunge profile picture
This q is IT, make of break. If they can't make tons of money in this environment, they never will. Here's hoping.
Either something is seriously wrong with their trading models, or this thing will EXPLODE in April. I just wish their trading update would be moved forward to March. Volatility might already be lower in April, with great Q1 results but subdued guidance, capping the potential upside.
Robbert Manders profile picture
Another thing to consider is that a recession is highly probable, for Europe at least. This is happening so fast that we have little data about the real world impact. Because of this lack of hard data to trade on, markets should remain volatile (down and up) over the next weeks. Meanwhile, FT gained just EUR 1 YTD (+4.5%) while it is increasingly likely that their Q1 earnings alone will surpass that figure.
Just to give you an idea of how much money Flow and Virtu are making at the moment. This is the top 10 list of highest Vix's SenP500 of the last 10 years. 2020 is in the top 10 so much as 6 times. And dominates the top 5 completely.

12.03.2020 62,96
09.03.2020 62,12
11.03.2020 55,82
10.03.2020 55,66
06.03.2020 54,39
24.08.2015 53,29
06.02.2018 50,30
28.02.2020 49,48
21.05.2010 48,20
08.08.2011 48,00
Tnx for the interesting article. I sold my Virtu yesterday with nice profit and bought even more Flow traders, since Virtu rose 40% more than Flow until now and these guys both make lots of money now. Flow is very silent but will communicate 21-4 with the quaterly results which will be breathtaking. Flow will make up the difference with Virtu, at least 10% up after 21-4 and upgrades from banks but probably 30-40% up
Robbert Manders profile picture
Seems like an amazingly good trade. Congrats on your profits!
Hi Robbert,

Thank you for your article.
However, I think an 'annual EPS of EUR 2' is quite optimistic. With 1 extremely volitile quarter (like this quarter) en 3 lower volitile quartes, an EPS of EUR 2 realististic. However this isn't each year the case, such as in 2017 (EPS 0,85) and 2019 (EPS 1,15).
An average EPS in a period of, let's say, 5 years is more around EUR 1,50 /year. Multiplying this with a PE ratio of 15 the stock is valued at EUR 22,5.
Therefore the stock is fair valued at this moment
Robbert Manders profile picture
I see where you're coming from and I have considered the same. However, the lower volatile quarters such as the ones we have seen in 2017 and last year are surprisingly uncommon when you look at the long term (20-30 years). That modest level of volatility is by no means structural.

Let met illustrate this. There were just a total of 18 Eurostoxx 600 index moves of more than 2% from jan 2017 up to yesterday vs. 23 in 2016. List down here ->
2020 6
2019 5
2018 6
2017 1
2016 23
2015 31
2014 12
2013 5
2012 14
2011 31
2010 7

If you also take into account 1% moves, 2017 and 2019 were clearly in the bottom 3 years of the decade in terms of volatility. I think that this has imprinted the idea on investors (perhaps not too dissimilar from yourself) that this is a normal environment and these investors are selling the stock based on your logic.

If you look back at the early 2000s or '90s, you'll also see that more volatility is usual. I must say that 2015 was unusual and that's why the founders decided to list the company in that year after which is shot up to the EUR 40s. I found the stock overvalued back then, but the case for 22.50 only makes sense if the margin keeps eroding for many years to come. That is, I think, the real bear case.
Willem86 profile picture
Thanks Robert. I agree, any additional day with these volatiltiies are golden and will skew the risk reward to the upside
Thanks for the article but volume or lack of it worries me..
Robbert Manders profile picture
VIX is up, Flow is down today. It strikes me as a nice time to build a position.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!


SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on FLTLF

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.