To: X Y Zebra who wrote (553 ) 4/29/1999 6:18:00 AM From: Doug (Htfd,CT) Respond to
Good discussion of online brokers, in "Fool on the Hill" part of Motley Fool Evening News for 4/28 at fnews.yahoo.com "Though the earnings and price-to-sales multiples on these stocks look out-of-sight, there's good reason. The online brokers appear to be the perfect Internet businesses. They've got a highly addictive repeat-purchase business that's already nicely profitable if you discount the discretionary ad spending. While marketing costs will remain high for a while as the hot competition gets even hotter, one could argue that even E*Trade is under-spending in its efforts to gain market share since the long-term value of each customer is much higher than the acquisition costs. And that value is increasing." fool.com "Investors should look closer at all of the top online brokers, but I like Schwab in particular. All of these firms rely heavily on trading volume for commission revenue, so all would be hurt badly in a bear market. But Schwab gets comparatively more of its revenue ($319 million in Q1, or 33.5%) from steadier sources, such as interest income from customer assets (up 43% in Q1) and mutual fund service fees (up 35%). "Given the recent volatility in the sector, moms with heart conditions might want to avoid it altogether. Indeed, a 50% sell-off from the recent high wouldn't be surprising at all. But below $100, I think you can be a happy long-term buy-and-hold Schwab investor. There's simply no company better positioned to benefit from the ways the Internet is transforming the financial services industry."
