In Hayden-Capital‘s third quarter letter to investors (the fund generated a 1% return net of fees for the period to bring its total gain to 14.9% year-to-date, beating the S&P 500’s advance of 14.2%), the fund brought up some insightful comments concerning Interactive Brokers Group, Inc. (NASDAQ:IBKR). Let’s take a closer look.
For those that don’t know, Interactive Brokers Group, Inc. (NASDAQ:IBKR) is a brokerage provider for traders, investors, hedge funds and investment advisers. Although brokerage services are generally commoditized, Interactive Broker’s pricing is ‘unparalleled’ in many cases. Specifically, the company, when excluding its annual/monthly fees, Interactive Brokers Group, Inc. (NASDAQ:IBKR) has the lowest commission in the market (according to some calculations) for $2.26 per trade versus other brokers that charge $7-10. Due to the growing stock market and Interactve Broker’s value proposition, Hayden-Capital notes that the company’s new account growth has been outstanding at around 17% year-over-year over the past eight years.
Hayden-Capital then said, ‘the company has a notoriously steep learning curve and room for improvement, and we disagree with management on issues such as customer service and marketing strategies’. The fund thinks there is definitely room for improvement and that “it’s the earlier innings of an inflection here’. The fund increased its position in the quarter slightly, by around 10% of its original size. For the year, Interactive Brokers has done very well, rallying 48% year-to-date and 62.8% over the last twelve months. The stock trades for a P/E ratio of 46 and a forward P/E ratio of 32.25. It also pays a 0.74% dividend yield at current prices.
Disclosure: the author has an account at IBKR