Article from Internet Speculator!
(6/01/99) This Week's Featured Stock: Knight/ Trimark Group (Nasdaq: NITE) $56
Doing something right at NITE
Knight/ Trimark Group (Nasdaq: NITE) is a market maker in approximately 7,000 NASDAQ securities, other over-the-counter (OTC) equity securities, and equity securities listed on the New York Stock Exchange and the American Stock Exchange in the Third Market, the over-the-counter market for exchange-listed equity securities. NITE generates the majority of their revenue by creating a market for stocks and earning a small commission on trades. NITE appears to be in the right place at the right time, they have valuable strategic partners in place, they are profitable already and growing fast, and they continue to provide new potential revenue streams.
The stock market and investing are becoming increasingly popular. The Internet has helped make investing readily available to anyone with Internet access. Information is easy to access and the average investor now has professional resources available at his or her fingertips. Online brokerages provide very affordable transaction fees, attracting an astounding number of new and seasoned investors. By the end of 1998, one out of every seven equity trades took place over the Internet and recent numbers suggest that this number may now be as great as one out of every four. The number of Online trading accounts is expected to more than triple to over 24 million by the end of 2002. This growth directly benefits NITE, whose five largest broker-dealer customers include E*Trade, Ameritrade, Discover Brokerage Direct, Waterhouse Securities, and Brown & Company. Other customers include Paine Weber and Merill Lynch. Needless to say, this is an impressive list. Furthermore, many of these customers are also shareholders in NITE.
NITE is just beginning to experience a new level of growth, justified by their most recent quarterly earnings. For the first quarter of 1999, NITE recorded revenue of $182.7 million, an increase of 188% over the $63.5 million recorded over the same period one year earlier. NITE also experienced tremendous growth in terms of income, earning $37.4 million in the first quarter of 1999, representing a 344% increase over the previous year, and 117% over the previous quarter. In a recent press release, Kenneth D. Pasternak, the Company's President and CEO stated that, ''We are very proud of our results during this quarter. As the largest execution destination for all equity transactions originated over the Internet, we feel that Knight/Trimark is uniquely positioned to continue to benefit from the unprecedented growth in online trading." Pasternak's comments seem to be valid based on the enormous growth in trade executions that NITE is experiencing.
NITE executed over 306,000 trades per day on average during the first quarter of 1999, a 42% increase over the previous quarter. To break this down even further, let's take a look at NITE's growth in terms of trades executed over the last few years.
# of trades executed in 1 day (for the first time)
Date
100,000 June, 1997
200,000 March, 1998
300,000 December, 1998
400,000 January, 1999
520,000 April, 1999
If this rate of growth continues, NITE estimates that it could reach one million daily transactions by the year 2000. This chart displays significant growth. In 1995, NITE executed an average of 20,000 trades per day. NITE has realized 2,500% growth in terms of trades executed over the past 4 years.
NITE already has established a leadership role in market making, yet the future provides even more potential. In April, the Company announced the rollout of its proprietary eKNIGHT(TM) Web product, a sophisticated Internet-based electronic order entry and order management product. This secure proprietary Internet product will provide NITE's customers (broker-dealers and institutions) with electronic access to its trading systems, enabling them to initiate and monitor securities transactions from their desktops.
NITE's fastest growing revenue stream comes from institutional investors, including mutual funds, investment advisors, pension plan sponsors, trusts, and endowments. Institutional trading grew 39% in the first quarter and CEO Kenneth Pasternak recently stated that, "expanding our institutional business in the U.S. and abroad is a top priority this year." On April 14th, NITE announced that its new London-based subsidiary, Knight Securities International, Ltd., received regulatory approval from the Securities and Futures Authority in the United Kingdom. Commencing operations in May 1999, Knight Securities International will initially operate as an institutional sales office, arranging transactions in U.S. equity securities between European institutional customers and Knight Securities.
NITE's stock price has been reflecting the company's performance, gaining 409% already this year. However, based on the company's success and the industry's potential, this growth may well be warranted. NITE currently has a market capitalization of $5.92 billion and they have been receiving numerous upgrades on a fairly regular basis. Currently, of the 8 analysts covering NITE, 6 have Strong Buy ratings and 2 have Buy ratings. NITE has rapidly established themselves as a leader in their field and they continue to grow faster than their competition. As the Internet and investing become increasingly popular, NITE will continue to benefit and profit. Since I am confident in the future growth of both the Internet and investing, I believe that NITE may provide investors with an excellent investing opportunity. And finally, I have saved the best for last. Just last Thursday, The National Association of Securities Dealers voted to expand trading hours on the Nasdaq Stock Market. The new late trading hours will run from 5:30 PM to 9:00 PM or 10:00 PM Eastern time, and that will be limited to stocks on the Nasdaq 100. Many believe that the New York Stock Exchange will follow suit. These expanded hours will encourage additional trading, which NITE will directly benefit from. The Model Portfolio is taking a stake in NITE. For more information, check out The Internet Speculator's NITE Home Page, where you can view an impressive NITE slide show. Brad Goldstein
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