Should Investors Buy the Brokerage Firms on Rebounding E TRADE Financial Corporation (ETFC) Equity Flows?

Potential game changer

Interactive Brokers Group, Inc. (NASDAQ:IBKR) was a small, private operation when the markets collapsed back in 2000. The company offers a whole suite of trading products on 100 electronic exchanges and trading venues worldwide at low commissions. The average commission is only $4.49.

Interactive Brokers reported 460K DARTs for January, 10% higher than prior year and 16% higher than the prior month. The company reported that ending customer equity jumped to $34.4 billion, 27% higher than last year. The really interesting number was customer margin loan balances are up 50% over the prior year at $11.1 billion.

5-Year Total Return Chart

The shift to international and fixed income funds over the last 5 years crushed all but Charles Schwab over that time period. As the chart below shows, all of the stocks underperformed the S&P 500 during that time period:

SCHW Total Return Price data by YCharts

Conclusion

Based on the initial January results, all of the firms are seeing very positive trends. Clearly an increase in the stock market will bring individual investors back to making equity trades that benefit these companies, but unfortunately most of the stocks have all ready seen an initial pop on those expectations.

As roughly 5 years have passed since the last equity rush, one could expect a new trend to emerge. Investors looking for access to an almost unlimited list of exchanges might favor Interactive Brokers while anybody still seeing the market as risky might move toward Charles Schwab or even Ameritrade. Due to the relatively massive size of Schwab and valuation, it appears that Ameritrade offers the better value while Interactive Brokers provides the best speculative play in the rebounding sector.

The article Should Investors Buy the Brokerage Firms on Rebounding Equity Flows? originally appeared on Fool.com and is written by Mark Holder.

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