Who Benefits From the Increased Volatility?
Over the last six months or so, trading volume has been much higher than historical averages. Investors are uneasy, and they are moving their money around – in and out of sectors and/or changing asset allocations.
There is one group of companies that benefits from this.
Yesterday, I was speaking with a friend of mine who works within the financial industry, on the advertising side of the business. And something Tom said hit home with me: With companies cutting back on advertising, parts of his business are down – but online brokers are going strong.
Online brokers get commissions whether investors are buying or selling – and given the volatility in the market, we know there is a lot of buying and selling going on.
The two online brokers that jump out at me are TD Ameritrade (AMTD) and Charles Schwab (SCHW). Their stocks have dropped with all the other brokerage firms, but it is a case of guilt by association. These two companies don’t have exposure to the mortgage market and they aren’t involved in proprietary trading, so they aren’t looking at the losses the big full-service brokers are being hit with.
AMTD and SCHW should do well when the market settles down and starts heading higher. In the interim, they are still getting those commissions as investors move in and out of the market. Adding either of these two companies to your long-term portfolio should pay off.
Rick Pendergraft
Inspired by his high school economics teacher, Rick Pendergraft fell in love with the markets at an early age. He entered his first investing competition at 17, and opened his first brokerage account before he finished college. At the age of 23, on the third options trade he had ever placed, Rick turned $1,800 into $22,000 in less than a week, when the company he bought became the target of a takeover. He admits it was a stroke of luck, but it was a memorable education as to the leverage that options can provide. After a ten year career in banking, Rick decided to pursue trading full-time. To get his foot in the door, he started out in the sales department at Schaeffer's Investment Research. It was not long before his talent was recognized and he was invited to apprentice under Bernie Schaeffer, one of the top options traders in the world. Rick thrived in his new position and twice received the award for "Top Trader."Rick has developed a loyal following of readers who are grateful for his timely warnings and profitable advice. He is widely recognized as a market expert and has been frequently quoted by Reuters, BusinessWeek, Forbes, USA Today, the New York Times, and the Washington Post. Rick's primary focus is on identifying short and intermediate term rising and falling trends in the major market sectors. His analysis is based on technical factors along with indicators of market sentimentRick lives near Delray Beach, FL with his wife and three children.