This $50 Stock Is the Next Takeover Target

By Lou Basenese, on Tuesday, February 25, 2020

The ink isn’t even dry on the $26 billion merger of Charles Schwab and TD Ameritrade — and now this:

Morgan Stanley is paying $13 billion for E*TRADE, sparking a huge rally in the stock.

But here’s the thing. Because of these two deals, another deal is about to take place… and we believe it’s an opportunity to make a quick profit of 100% or more.

But don’t blink, or you’ll miss out.

Let me explain…

“I Told You So!”

Last month, I forecasted that a wave of mergers and acquisitions would grip the market in 2020.

I also shared my view that consolidation trends are a powerful way to identify the market’s next takeover.

The wave of deals in the online brokerage industry proves the validity of both these predictions:

After TD was acquired, E*TRADE instantly became a target. As I explained in January, deal making leads to more deal making. And in the online brokerage industry, it’s on like Donkey Kong!

But to profit from this activity, you need to take positions in takeover targets before a deal is announced.

Which is why I’m writing you today…

Consolidation Is the Only Path Forward

After the E*TRADE deal was announced, we learned that Goldman Sachs and Interactive Brokers had been interested in acquiring the company, too. And for obvious reasons:

For years, Wall Street’s money managers have been struggling to re-energize their profits. And the current race to zero commissions has only exacerbated the problem.

Here’s how industry rag InvestmentNews summed up the situation:

“After nearly every major brokerage eliminated trading commissions following Schwab’s move in October, firms will increasingly look to make up lost revenues by investing retail investors’ cash. This business model requires a large volume of customers, leaving consolidation as the only viable path forward for many firms.”

In other words, it’s merge-or-die time.

Don’t Get Left Behind

By scooping up E*TRADE, Morgan Stanley added 5 million accounts with $360 billion in assets, and became the largest wealth manager in the world.

It now has $3 trillion under management.

But now Morgan’s competitors like Goldman have to make sure they don’t get left behind — which means more acquisitions are ahead.

The thing is, there’s only one major, publicly-traded online brokerage left to acquire.

And for investors like us, therein lies the opportunity…

The Last Takeover-Target Standing

The $22 billion Interactive Brokers (IBKR) is the last major online brokerage left standing.

That’s why it’s a top takeover candidate.

Furthermore, it’s a very attractive candidate. And I say that not simply as an analyst, but as a customer.

Consider:

  • Every year, Interactive Brokers consistently ranks as the top “low-cost broker.”
  • It boasts top-notch order routing, advanced tools for analytics and risk management, and every order-type imaginable. That’s how it facilitates sophisticated trading and investing strategies.
  • It also offers access to over 120 exchanges in more than 30 countries across stocks, futures, options, forex, bonds, and mutual funds.

For a self-directed investor, there’s no equal.

But there’s a lot here for a potential acquirer, too…

100x Growth Potential

You see, Interactive Brokers offers a huge customer base, and an untapped growth opportunity.

Currently, it boasts over 650,000 customer accounts, and $162 billion in assets.

Its average investor trades 20 times per month, which is 20x more than its competitors’ customers.

And yet, as the company’s founder Thomas Peterrfy recently shared, Interactive has barely scratched the surface. “[The company] could easily grow 100-fold and still have room left over.”

Most important of all, Interactive’s top brass is amenable to a takeover — at the right price, of course…

An Offer It Can’t Refuse

As Peterrfy told MarketWatch last week, he’d sell the company if “somebody comes along and gives me an offer I can’t refuse.”

Based on historical PE multiples, I estimate the company could fetch $108 to $142 per share.

With shares currently trading for roughly $50, that represents an opportunity to double your money.

Don’t miss out!

Ahead of the tape,
Lou Basenese
Lou Basenese

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