To: Uncle Frank (6527 )
From: sun-tzu Saturday, Sep 18 1999 12:17PM ET
Reply # of 6683
To GG investors,
I began reading your link when a friend told me you had one of the best forums on SI. I was intrigued by the GG philosophy of attempting to find, before the fact, those few companies with such extraordinary competitive advantage that they will, over a period of years, far outgrow the average company in earnings, revenue, etc. With the thoughtful, analytical and collegial argumentation posted here, I would like to present a due diligence that I believe fits your criterion. Please bear with me while I attempt to elaborate on some of the more salient features other than what seems to be the most readily apparent.
E*Trade Group(EGRP): A provider of online financial services with strategic priorities including customer acquisition and brand building, global infrastructure and development, product innovation and diversification, delivery of digital financial media. Their vision is compelling; they see a radical transformation of how personal financial services will be delivered, purchased and managed.
The on-line investing is an aspect of the corporation that is apparent to all; however, the true potential of this company lies in its ability to provide, global financial services over the fastest, cheapest and most efficient telecommunications medium. EGRP's current partnerships and holdings are vast include:
1) TIR Holdings- based in Dublin Ireland, it is a leading international broker offering multi-currency execution and settlement services. This is expected to accelerate E*Trades' goal of building the first global X-border trading network for investors.
2) Archipelago-EGRP has a 12.4% stake in this electronic exchange(ECN) which matches buyers and sellers electronically. Archipelago has filed to become its own exchange and other investors include Goldman Sachs, Instinet(Reuters), Merrill Lynch, JP Morgan and CNBC(GE). This allows EGRP to funnel its transactions cheaply thus charging cheaper transaction fees while still obtaining profits through the ECN.
3) EGRP is 27.2% owned by Softbank, a Japanese internet giant that is on the 'short list' to be included in the Nikkei. Other significant Softbank investments include Yahoo, GeoCities and Ziff Davis to name but a few. On September 8th, Softbank announced a $1.28 billion partnership with GBLX and MSFT to provide a land and undersea fiber-optic telecommunications network to Japan for ultra high-speed telecom services such as E-commerce.
4) On June 2nd, EGRP announced a $1.8 billion deal to acquire Telebanc-the largest internet bank which allows EGRP to significantly differentiate the companies product line and revolutionize personal financial services. Customers will be have access to FDIC insured cash managed accounts, capacity to purchase CD's and mutual funds, as well as equity and on-line investing.
5) Other holdings include a 28% stake in EOffering, a net centric investment banking firm committed to helping dynamic internet based companies raise capital and shape the underwriting market for the next millenium. Clients are charged up to 30% less than that typically charged by other investment banks.
6) E*Trade business solutions which offer a full spectrum of stock plan management services which include plan administration, employee communications, on-line transactional capabilities and an emerging companies program.
EGRP currently has affiliate brand sites in Australia, Canada, Sweden, France and the UK. E*Trade Japan is scheduled to begin operating in October with its' majority owner, Softbank, paving the way. EGRP has many partnership agreements with companies such as, but not limited to, Hilton, Sprint, Earthlink and Buy.com. EGRP is expected to offer after hours trading this month through Instinet and pre-market transactions will follow shortly.
As of 9/17, market cap is $5.38 billion. On July 19th, 3rd quarter revenue of $151.7 million was announced as compared to $126.8 million for the previous quarter and $66.5 million for the prior fiscal year. An increase of 20% and 128% respectively. In that quarter, they added 332,000 new accounts setting an industry record. Total active accounts as of 6/30/99 were 1,241,000 with $26 billion in customer assets.
I believe the synergies offered in this global financial corporation are astounding and still in its nascent stages. Particularly, the interactions between EGRP, Softbank, Telebanc, Archipelago and TIR Holdings as outlined above. EGRP has taken a huge hit from an April high of $72.25 to $22.4375 as of market close on Friday. They have been placed in the same category as other on-line brokers and are suffering the consequences of a slowing market with regards to volume as well as being out of favor. $22.4375 per share is an absolute bargain particularly since this is not a simple on-line broker and the reward from their synergistic investments have yet to be fully understood or realized.
Interest rate concerns and a down-trending sector may push this stock lower but I believe it to be on the verge of a breakthrough before the end of the year. I would appreciate the thoughts and argumentation from your thread regarding what I believe to be a tremendous opportunity for long-term growth.
Thanks to All,
sun-tzu (Mike)
|
