Get Rich From Retiring Baby Boomers With This Little-Known Stock

MarketAxess also has an unusually secure financial position for a company of only $1.15 billion market cap. The company has strong, consistent free cash flow and zero debt. Since 2009, it’s been paying a quarterly dividend of 11 cents a share and it recently announced a special dividend of $1.30 a share scheduled for Dec. 27. The company has more than $150 million in cash it can use to purchase other electronic-trading companies and increase its market share.

Although there isn’t much revenue growth right now, it is still consistent and the company enjoys an average operating margin of 44%. Another strong indicator of the company’s compelling position is the fact that 97% of the stock’s float is owned by mutual funds and institutional investors.

Take a look at MarketAxxess since 2008 when the first baby boomers started to retire:

Why MarketAxess looks like a great buy

MarketAxess is quietly becoming the largest liquidity pool for fixed-income trading, so I would anticipate its market share could go from the current 12.5% to as high as 20% as acceleration gains steam. I also like its high fixed-fee income stream, which should help the company if revenue declines due to less trading volume. Finally, the stock is attractively priced compared to competitors. Its price-to-earnings/growth (PEG) ratio is 1.37, below the industry average of 1.53 and sector average of 5.70. Moreover, its year-over-year revenue growth of 10.5% is the highest within its investment market operators industry.

Risks to Consider: Overall trading volume of high-grade U.S. corporate bonds decreased every year from 2003 through 2008 prior to the major shift in baby boomers retiring. This decreased MarketAxxess’ market. However, corporate-bond trading volume increased dramatically in 2009 because of many factors including constrained bank lending, fewer asset-backed securities being issued and larger volumes of outstanding corporate bonds. If trading volume slips back, then it could hurt MarketAxxess’ profitability. Also, its European exposure could negatively affect earnings if there is further decline in the revenue coming from Europe.

Action to Take –> That being said, the trend has been very favorable for MarketAxess and I expect it to continue. Buy MarketAxess up to $36 a share. It is a strong pick for any long-term investor who is looking for a safe dividend-paying investment with the potential for long-term growth.