Editor’s Note: It may look like money is flooding out of the market, and leaving nothing behind, but that’s only true if you don’t know where to look. There’s still profit to be made. Today, we’ll be talking about a specific firm that’s a great example of that, but there’s actually an entire hidden side to the stock market that the biggest investors and institutions can use to get better deals than the general public even knows about. Investing expert D.R. Barton has been using this secret market to show folks how to make profits since October, and now he’s ready to share how you can use it to make money during the coronavirus crisis. All you have to do is click here to check it out.
I want to start today’s chat with a question that is on the minds of millions of investors.
It’s particularly pressing for anyone over 50 or for those planning their retirement portfolios.
See, financial planners will tell their clients they should have some money in fixed income securities – and the closer to retirement the more of it.
Which brings us back round to investing’s existential question: how do you earn any meaningful bond yields in a zero-interest market?
Fortunately, I have the answer. And as you might imagine, it comes from the wealth-creating tech sector.
The firm I have in mind has quietly become a major player in electronic bond trading. Don’t scoff. Volume for this firm rose nearly 51% in March to $916.6 billion.
Not only that, but did I mention the stock is trading well above its price the day the stock market tanked with the coronavirus correction?
Modernizing the Bond Market
Now then, we’ve seen a lot of headlines lately about renewed volatility in the stock market.
What doesn’t get much attention is that the bond market is just as volatile. After all, traders are scrambling because the Fed just cut interest rates again to help the economy bounce back from the COVID-19 shutdown.
But make no mistake. This is a massive field.
Last year alone, trading volume hit nearly $40 trillion when you add in other fixed-income securities. And that’s just in the U.S. That amount is up more than 50% in less than a decade.
Now you know why MarketAxess Holdings Inc. (MKTX) has crushed the overall market at a very tough time.
From the day the COVID correction started on February 19 through its recent closing high of $456.71 on April 30, the stock was up 33.7%. By contrast, the S&P 500 was down 13% over the same period.
No doubt, MKTX results are impressive. But it’s the reason why the stock has done so well that is important to tech investors.
MarketAxess was founded in 2000 with the goal to bring electronic trading to the old-fashioned bond-trading market. Unlike stocks, which are traded through computers that find you the best available price, the vast majority of bonds are still traded by one broker calling up another.
For a market that sees $67 billion worth of bonds change hands every day, that’s extremely inefficient.
That’s why MarketAxess’s electronic trading platform has been such a hit. It allows you to stream live prices, price history, and the available bond inventory from all participating dealers.
Clients can trade instantly, without haggling over the phone. The company even lets you automate your bond trading strategies.
So it’s no wonder MarketAxess now has more than 1,700 active clients, up 12% in the last year. More than 825 of those clients are international, a number that’s also up 12%.
Meanwhile, 1,190 clients are using MarketAxess to trade emerging market bonds up 15% in a year.
That makes MarketAxess the largest company in the electronic bond trading space. But there’s still plenty of upside ahead. Only a fraction of the bond market has moved to electronic trading.
Fixed Income Expertise
Not bad for a company whose Chief Operating Officer started his career as a plumber. Of course, Chris Concannon is now a long way from those early days.
Indeed, he was recently profiled in the prestigious Financial News. He’s worked as a lawyer for the SEC, as Executive Vice-President at Nasdaq, and as CEO and President of Bats Global Markets.
But his first job was as a plumber, at the age of 15. It was a job Concannon kept all the way through college until he was 28 and started working at the American Stock Exchange.
Being a plumber appealed to him because “I like to solve complex challenges that not everybody wants to solve,” Concannon told Financial News.
He was hired by MarketAxess’ visionary founder and CEO, Richard M. McVey, who is unparalleled in fixed-income markets.
Starting in 1992, McVey was managing director of JPMorgan Chase & Co. (JPM) North American futures and options business. He then moved to be in charge of fixed income sales and institutional client relations for North America.
He’s exactly the man you want spreading the word about MarketAxess and the new services the company keeps bringing on. The growth story here practically writes itself.
As you’ve seen, the company’s client list is growing by 12% a year. With each one, the word spreads that there is a cheaper and easier way to trade bonds.
At the same time, the bond market itself is growing, meaning that even if MarketAxess remained at its present, small market share, their revenues would still rise.
To boot, MarketAxess has very strong fundamentals. For this year’s first quarter, the firm reported record sales of $169 million, up 36%. Diluted per-share earnings rose 41% to a record $1.96.
This is a company with nearly $357 million in cash and debt of just $98 million. Over the past three years, it has grown earnings-per-share by an average of 16%, putting them on pace to double in about 4.5 years.
In other words, this is a stock that powered through the coronavirus panic as though it had never happened.
And that means this is the kind of tech leader you can count to steadily build your wealth over the long haul.
But if you want to keep up with one of the most unstable periods in market history right now and in the short term, the team of elite investing experts at Markets Live with Money Morning are ready to help keep you informed.
Just click here to access their free live streams, and to receive new special updates on the latest market trends, upcoming events, and more, every day.
Cheers and good investing,
Michael A. Robinson