OLB News Piece...
Trader's Edge: Online Brokers
01-Dec-99 12:16 ET
[BRIEFING.COM - Cynthia P. Dietzmann] Another day, another bull market. Looking for ideas? Two words: online brokers (OLBs). This group did a slow crash and burn from its spring highs due to lower trading volumes, and admittedly lofty valuations-although no more lofty than other B2C (business to consumer) Internet stocks, which they paralleled until early August. And while many other B2C Internet stocks have roared back to life, the online brokers have been comparatively left behind. The entire group may be poised for a strong rebound for several reasons:
The group as a whole is more than 50% off its highs, led by JB Oxford (JBOH off 67%), National Discount Brokers (NDB, off 64%), Ameritrade (AMTD off 62%), and DLJ Direct (DIR, also off 62%). Muriel Siebert (SIEB) is 75% off its highs, but this statistic is exaggerated, as the stock has a very thin float (2.93MM shares), which exacerbated its spike.
The reason for the group's sell-off (lower trading volume) has reversed, and in a big way. This morning, Hambrecht & Quist's Greg Smith followed up a November 12 research note entitled "Online Trading Volumes are Smoking," with the following confirmation: "the Nasdaq market posted unprecedented volume throughout the month of November, averaging 1.3 billion shares per day vs. 977 million during the third quarter." Smith sees Q4 average daily web trades up 25-30% from Q3.
Putnam, Lovell & Thornton's analyst, L. Russell Keene, wrote similarly this morning: "the fourth quarter appears to be shaping up to be the best since the first quarter of 1999 for the online brokers."
This morning Ameritrade unveiled the Ameritrade Online Investor Index, which is designed to measure the percentage of online investors who were buyers out of total buyers and sellers on a given day. We believe this is significant, as it provides an easily accessible gauge of online trading volume, and keeps that statistic in the forefront of investor's minds.
Perhaps the best trading play here is JB Oxford (JBOH); its small float (4.28MM shares) will enable it to move more quickly when momentum investors move back into the OLBs. Others that will undoubtedly benefit from this move are: AMTD, EGRP, NDB, SCH, and NITE. |
