On May 31, 2013, we upgraded
Interactive Brokers Group, Inc.
) from Neutral to Outperform. This was based on the company's
robust capital position and liquid balance sheet despite its
earnings missing the Zacks Consensus Estimate.
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Why the Upgrade?
A low leverage set Interactive Brokers apart from its
competitors. The company has been able to effectively manage its
liquidity and maintain significant borrowing facilities through
securities lending markets and banks. The company continues to
maintain over $2 billion of excess regulatory capital in its
broker-dealer companies worldwide.
Interactive Brokers' global presence - especially in the fast
growing markets of Taiwan, Mexico and India - is expected to be a
major growth driver in the near term. Further, the company's
extensive adoption of technology positions it advantageously when
compared to peers. Interactive Brokers has a very low level of
compensation expense relative to net revenue, mainly due to its
Since its inception, Interactive Brokers has primarily focused on
developing proprietary software to automate broker-dealer
functions. Hence the company is one of the lowest-cost providers
of broker-dealer services. Further, due to its technological
superiority, the company was able to quickly make its systems
comply with multiple ad hoc trading restrictions imposed by the
Securities and Exchange Commission (SEC).
Further, the company's consistent capital deployment activities
are expected to boost shareholders' confidence.
Other Stocks That Warrant a Look
Interactive Brokers currently carries a Zacks Rank #3 (Hold).
Some better performing stocks include
Ladenburg Thalmann Financial Services Inc.
LPL Financial Holdings Inc.
GAIN Capital Holdings, Inc.
). While the first two carry a Zacks Rank #1 (Strong Buy), the
third one holds a Zacks Rank #2 (Buy).