We Rocked TD Ameritrade!

“I don't look to jump over seven-foot bars: I look around for one-foot bars that I can step over."

- Warren Buffet

The Portfolio

Year-To-Date the portfolio is up +24.48%.

Our benchmark index, the S&P 500 is up 23.80% YTD.

If you're an investor looking for diversification and growth, and you'd like to know more about the way I build a portfolio; please feel free to email me. clay@claybaker.com

Congratulations to any of my readers who invested in TD Ameritrade. The acquisition by Charles Schwab catapulted shares today $7.00 per share or +16.92%.

TD Ameritrade

TD Ameritrade (AMTD) was added to the portfolio at the beginning of 2019 with just 63 shares. On Tuesday October 1st Charles Schwab announced that they were eliminating commissions on all trades. Investors were rattled by the news, but deeper analysis proved this to be an excellent strategic move.

Schwab earned just 3% - 4% of revenues from commissions, while TD Ameritrade earns 25% from commissions. The strategic move was a great one for Schwab's Registered Investment Advisers (RIA's) who can now focus on being fiduciaries. But the truly competitive move was to force all their competitors to match their free trading offer or come up with another way to keep and attract customers. For TD Ameritrade, free trades broke the business in a way that makes them an attractive take-over target. Schwab can now acquire all of TD Ameritrades customers, the assets which generate significant float revenues and a larger customer base that they can offer RIA services and other products to. In the final analysis it's the customer who wins big by this consolidation through no fees, no commissions, better services, better banking and offices nationwide.

On October 3rd, right after the zero commission announcement, I posted that I would be adding 100 shares of TD Ameritrade (AMTD) to the blog portfolio. While my reasoning for the addition wasn't spot on, I thought AMTD would acquire someone to compete against Schwab. My rational was that I felt AMTD's banking arm made them a really attractive business and investors were looking the wrong way when they sold the stock off. Whether AMTD worked to scale their business up around RIA's, lending and float revenues, or sold themselves to someone else was irrelevant to me. One of those scenarios had to play out and the winner would be anyone with a low cost basis in AMTD. Our investment in TD Ameritrade is now up 29% YTD.

What's Next?

eTrade is hanging out there all by itself. Schwab also acquired the brokerage operations of USAA, a large population of military families who will be all to eager to use Schwab's RIA services. That acquisition removed the possibility that TD Ameritrade would buy the assets of USAA.

eTrade is entirely retail stock traders. Without commissions eTrade has no business. I suspect that eTrades customers will either move to Interactive Brokers or Schwab. Unless there's some part of the eTrade business that I'm missing, I just can't predict that anyone would buy eTrade unless the price is really low.

The next area of much needed consolidation will likely be in the new fintech companies that cater to millennial's with robo-trading services. Companies like Betterment, Wealthfront, Robinhood and many others are ripe for consolidation.

"Markets don't go to zero, Portfolio's do.

Buy quality, be patient...and look twice for motorcycles."

- Clay Baker

Stay Invested,

Clay

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Keep Me Honest

  1. S&P 500 declines to 2,350 or more (1-3-2019)

  2. Healthcare and Biotech sectors outperform (1-3-2019)

  3. S&P reaches 3,000 by year end (1-11-2019)

  4. CSCO reaches $60/share (1-18-2019)

  5. VEEV reaches $145/share (2-14-2019) (achieved $145.23 on 5-10-2019)

  6. CVS reaches $91.50 (2-27-2019)

  7. Bull market takes another leg up (4-7-2019)

  8. The Fed will lower rates 1-2 times (5-13-2019)

Clay's Rules

Rule #1: Don't lose money

Rule #2: See Rule #1

Rule #3: Portfolios go to zero, markets don't, Stay Invested

Rule #4: When a good stock you own drops 10% below your cost basis, add shares

Rule #5: Bull markets aren't sustained without the Transports

Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase

Rule #7: When an investment bank sells below book value, buy it

Rule #8: Tips are for waiters. Do your research.

Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:

HD, AMRN, BSTC, CVS, CSCO, VEEV, STZ, AMZN, NVDA, BCRX, GS, BDSI, VEEV, VTI, GLD, HD, AWR, XLNX, MRVL, NBRV

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved