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This $50 Inventory Is the Subsequent Takeover Goal
The ink isn’t even dry on the $26 billion merger of Charles Schwab and TD Ameritrade — and now this:
Morgan Stanley is paying $13 billion for E*TRADE, sparking an enormous rally within the inventory.
However right here’s the factor. Due to these two offers, one other deal is about to happen… and we imagine it’s a chance to make a fast revenue of 100% or extra.
However don’t blink, otherwise you’ll miss out.
Let me clarify…
“I Advised You So!”
Final month, I forecasted {that a} wave of mergers and acquisitions would grip the market in 2020.
I additionally shared my view that consolidation traits are a strong method to establish the market’s subsequent takeover.
The wave of offers within the on-line brokerage trade proves the validity of each these predictions:
After TD was acquired, E*TRADE immediately turned a goal. As I defined in January, deal making results in extra deal making. And within the on-line brokerage trade, it’s on like Donkey Kong!
However to revenue from this exercise, you’ll want to take positions in takeover targets earlier than a deal is introduced.
Which is why I’m writing you right now…
Consolidation Is the Solely Path Ahead
After the E*TRADE deal was introduced, we discovered that Goldman Sachs and Interactive Brokers had been interested by buying the corporate, too. And for apparent causes:
For years, Wall Road’s cash managers have been struggling to re-energize their earnings. And the present race to zero commissions has solely exacerbated the issue.
Right here’s how trade rag InvestmentNews summed up the scenario:
“After almost each main brokerage eradicated buying and selling commissions following Schwab’s transfer in October, companies will more and more look to make up misplaced revenues by investing retail buyers’ money. This enterprise mannequin requires a big quantity of shoppers, leaving consolidation as the one viable path ahead for a lot of companies.”
In different phrases, it’s merge-or-die time.
Don’t Get Left Behind
By scooping up E*TRADE, Morgan Stanley added 5 million accounts with $360 billion in property, and have become the biggest wealth supervisor on this planet.
It now has $three trillion beneath administration.
However now Morgan’s opponents like Goldman have to verify they don’t get left behind — which suggests extra acquisitions are forward.
The factor is, there’s just one main, publicly-traded on-line brokerage left to amass.
And for buyers like us, therein lies the chance…
The Final Takeover-Goal Standing
The $22 billion Interactive Brokers (IBKR) is the final main on-line brokerage left standing.
That’s why it’s a high takeover candidate.
Moreover, it’s a really engaging candidate. And I say that not merely as an analyst, however as a buyer.
Contemplate:
- Yearly, Interactive Brokers constantly ranks as the highest “low-cost dealer.”
- It boasts top-notch order routing, superior instruments for analytics and danger administration, and each order-type conceivable. That’s the way it facilitates refined buying and selling and investing methods.
- It additionally provides entry to over 120 exchanges in additional than 30 international locations throughout shares, futures, choices, foreign exchange, bonds, and mutual funds.
For a self-directed investor, there’s no equal.
However there’s lots right here for a possible acquirer, too…
100x Progress Potential
You see, Interactive Brokers provides an enormous buyer base, and an untapped progress alternative.
At present, it boasts over 650,000 buyer accounts, and $162 billion in property.
Its common investor trades 20 occasions per thirty days, which is 20x greater than its opponents’ prospects.
And but, as the corporate’s founder Thomas Peterrfy not too long ago shared, Interactive has barely scratched the floor. “[The company] might simply develop 100-fold and nonetheless have room left over.”
Most essential of all, Interactive’s high brass is amenable to a takeover — on the proper worth, after all…
An Supply It Can’t Refuse
As Peterrfy advised MarketWatch final week, he’d promote the corporate if “anyone comes alongside and provides me a suggestion I can’t refuse.”
Primarily based on historic PE multiples, I estimate the corporate might fetch $108 to $142 per share.
With shares at the moment buying and selling for roughly $50, that represents a chance to double your cash.
Don’t miss out!
Forward of the tape,
Lou Basenese