We came across a bullish thesis on Interactive Brokers Group, Inc. (IBKR) on Long-term Investing’s Substack by Sanjiv. In this article, we will summarize the bulls’ thesis on IBKR. Interactive Brokers Group, Inc.’s share was trading at $151.30 as of Oct 14th. IBKR’s trailing and forward P/E were 23.94 and 22.94 respectively according to Yahoo Finance.
A stock broker on a trading floor, working to capture profit in the markets.
Interactive Brokers Group (IBKR) is a leading automated electronic brokerage renowned for executing and clearing trades across diverse financial instruments, including stocks, options, and ETFs. With a global footprint, IBKR services 2.8 million accounts across 150 markets in 34 countries, catering to institutional investors and individual traders alike.
IBKR operates primarily through three products: IBKR Pro, IBKR Lite, and the Integrated Investment Account. Its revenue is predominantly derived from net interest income and commissions, with net interest constituting about two-thirds of total revenues due to recent Federal Reserve rate hikes. Despite significant account growth—expanding from 200,000 accounts in 2012 to 3 million—total revenue grew at a slower compound annual growth rate (CAGR) of 13.15%. This performance underscores the cyclical nature of the business.
Investing in IBKR offers compelling advantages. The firm showcases impressive financial health, with gross margins around 90% and operating margins near 70%. The stock has exhibited strong performance, achieving a CAGR of 9.3% over 17 years and an exceptional 68% over the last year. Additionally, IBKR’s dual-share structure affords significant control to founder Thomas Peterffy, enhancing stability and strategic focus.
Key growth drivers include the expanding electronic brokerage market, projected to grow by 6.5% annually until 2030, and the increasing interest from retail investors in emerging markets. Moreover, IBKR’s conservative capital allocation strategy positions it well for potential acquisitions in the brokerage sector. With its robust financials, low-cost structure, and technological advantages, IBKR is well-positioned for continued growth. The company’s strong balance sheet and commitment to operational efficiency make it an attractive investment opportunity in an evolving market landscape.
Interactive Brokers Group, Inc. is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 52 hedge fund portfolios held IBKR at the end of the second quarter which was 51 in the previous quarter. While we acknowledge the risk and potential of IBKR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IBKR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
