3SOF

Quote from: eggman11 on December 12, 2005, 12:12:54 PM
TRAD filed an 8K today stating that it entered in an agreement with its management on a severance package if thre is a "change in control" of the company. Sounds like they are preparing themselves for a buyout? Very Interesting....................

Yes, quite interesting eggman11 

Here's the transcript:

«On December 9, 2005, TradeStation Group, Inc. (the "Company") entered into a Management Continuity Agreement (each, an "Agreement" and, collectively, the "Agreements") with three of the Company's Section 16 officers, namely, David H. Fleischman (Chief Financial Officer, Vice President of Finance, and Treasurer), Joseph Nikolson (President and Chief Operating Officer of TradeStation Securities, Inc., the Company's principal operating subsidiary) and Marc J. Stone (General Counsel, Vice President of Corporate Development, Secretary, and director of the Company's operating subsidiaries) (each, an "Executive"). Each of the Agreements was in the form attached hereto as Exhibit 1. Each Agreement provides for potential severance payments during the 100-day period following a Change in Control, as that term is defined in the Agreements, in an amount equal to up to two years of Executive's annual compensation. The Agreements do not commit the Company to retain any Executive's services for any fixed period of time, do not provide for severance payments unless the Company undergoes a Change in Control, and do not represent new hires or appointments, as each Executive has been serving in his current positions for several years.»

This may fuel speculation about a takeover on TRAD from a bigger online brokerage, E*Trade for example (there would be great synergy, and E*Trade costumers would probably get a much better service over the long run). It makes perfect sense to me, I wish I own TRAD too (well, not some shares, but the company lol).

To temper things, on the agreement it reads: «WHEREAS, it is customary for a company to enter into a management continuity agreement such as this Agreement with its key executives.»

Is it? I don't know, but I think so.

I believe the most important thing behind TRAD's success is their brain power, so if I were to takeover the company it had to be with its key executives.

The words «change in control» may fuel speculation of a takeover and that speculation makes sense because the company is way undervalued and a merger would bring great synergies and promote a better brokerage service for both companies.

Now I have one more motive to hold TRAD:

- It is a takeover candidate.

Unfortunately that 8-K filing didn't fuel takeover speculation on TRAD. It looks like «WHEREAS, it is customary for a company to enter into a management continuity agreement such as this Agreement with its key executives» is true, so no reason for speculation and no impact on the share price.

TRAD went down 1.91% but there was no technical damage to the chart. I'm expecting a general market push to about SPX 1300 until January or so, and I expect TRAD to outperform the market.

I'll continue holding TRAD.

The ETF for the S&P500, SPY, is trading at a new 4 1/2 year high this morning, a little above yesterday's high, which was a short term resistance level.

Remember I'm expecting the SPX to reach 1300, that's where the top of its ascending channel is standing at this moment. The about 2.2% run for the SPX until the end of the year may bring a 10% or more advance for TRAD.

ET broke out to new highs yesterday, maybe today it is TRAD's turn. I'll continue holding it.

Hi, David

There is a rmour that trad may buy ET's daytrade business. This may be the reason for trad to drop.

Wrong chart...but you're doing a fine job!   

I mean, really, how hard can it be to keep some 30 something stocks in order? 

just kiddin...

Quote from: huayilu on December 15, 2005, 02:53:50 PM
Hi, David

There is a rumor that trad may buy ET's daytrade business. This may be the reason for trad to drop.

Really? The rumor should be the other way around, ET should buy TRAD, it would make a lot more sense. ET has a market cap of $7.92B and TRAD a market cap of $572M.

Thanks for the information 

Quote from: 422fwhp on December 15, 2005, 04:48:45 PM
Wrong chart...but you're doing a fine job!

I mean, really, how hard can it be to keep some 30 something stocks in order?

just kiddin...

Lol, I was in a hurry, sorry. When something like this happens please send me a private message, thanks 

TRAD came down to test the ascending trendline again. I wonder when it will breakout on the upside, but I'm pretty positive that it will.

Because I'm in this mood, let me give you an historic revenue chart for TRAD:



I see steady revenue growth since 2001. 2002 was a bad year for the markets and yet TRAD's revenues grew. 2004 was also a slow year, but, I see revenue growth anyway.

There are a lot more things to study beside revenues to know if this is really a good long term pick, despite the general market behavior, or not. We'll do that on the next updates.

In the meantime, I'll continue holding TRAD.

TRAD yesterday broke the ascending trendline on my chart below on the downside. I see the next support at $12.70.

Here's a chart for historic EPS on TRAD:



We have steady growth since 2001, which was the worst year on company's history. At present time, the P/E Ratio is 29 and the earnings growth rate is about 36%, so by this measure the company is just a bit undervalued.

It looks like the stock won't be able to sustain this somewhat rich valuation if the market starts to decline, so I'll use technical analysis to trade TRAD. The rule here seems to be: TRAD outperforms the market in bull markets and underperforms in bear markets.

I'll just wait for one more confirmation before I sell TRAD, I need to see that the stock doesn't hold the $12.7 horizontal support. I wish to continue holding TRAD, but if the stock is set to close below $12.70 I'll assume the trend is tunring bearish and I'll take my profits.

QuoteIt looks like the stock won't be able to sustain this somewhat rich valuation if the market starts to decline, so I'll use technical analysis to trade TRAD. The rule here seems to be: TRAD outperforms the market in bull markets and underperforms in bear markets.

I'll just wait for one more confirmation before I sell TRAD, I need to see that the stock doesn't hold the $12.7 horizontal support. I wish to continue holding TRAD, but if the stock is set to close below $12.70 I'll assume the trend is tunring bearish and I'll take my profits.

Unfortunately TRAD was closing below $12.7 so I sold it at price $12.55, taking just 13% in profits. As I suspected the stock turned bearish with the general market and there's nothing we can do about it.

I'll continue monitoring the stock and probably I'll buy it back at lower levels, possibly much lower levels, we'll see about that.

1. Profile

Tradestation Group, Inc. (TRAD). The Group's principal activity is to provide Internet-based securities brokerage for institutional, professional and serious, active individual traders. TradeStation Securities, Inc. and TradeStation Technologies, Inc. are the two operating subsidiaries of the Group. It operates in two segments: Brokerage Services and Software Products and Services. Brokerage services include direct Internet connections to electronic marketplaces, such as electronic communication networks (ECNs) or E-Mini exchanges, where buyers and sellers participating on the network are matched. These services are provided through an electronic trading platform, TradeStation 7. TradeStation Securities, Inc provides brokerage services. The Group also provides subscription services for TradeStation 7 through it's subsidiary, TradeStation Technologies, Inc.

2. Technical Analysis

2.1. Long Term Chart



TRAD is trading near its all time high, so no doubt it is bullish long term.

2.2. Medium Term Chart



TRAD's medium term chart is very bullish indeed.

2.3. Short Term Chart



TRAD is breaking out to a new all time high today with volume above average. The run can be overextended here, but the trend is certainly bullish. The 50 day moving average has provided support in the past. Currently it stands at $13.90.

(as I write the stock is coming off a bit)

3. Fundamental Analysis

3.1. Number of Shares Outstanding



This graph on historic number of shares outstanding tells me this company is not always asking for more and more investor's money, which is a positive factor.

3.2. Working Capital



The graph above can be quite misleading, because in 2004 there were some accounting changes at the company: since that date, investor's money at the company started to be accounted as an asset and liability, so the ratio between assets and liabilities (the current ratio)  went artificially down. The company has plenty of working capital ($71M) to proceed operations and investments.

3.3. Revenues



There was only one year on TRAD's history where revenue declined, which was 2001. Since then we see steady YoY revenue growth. Expectations for 2006 are for $115.76M in revenues, so the forward price to sales ratio is $757.33M / $115.76M = 6.54. The industry's price to sales ratio is 4.16.

3.4. EPS



2001 was really the turning point for TRAD. Since then earnings per share have been consistently growing. The current forward P/E is $17.28/$0.59 = 29.3. The industry's trailing P/E is 24.5.

3.5. Competition



I see that TRAD is growing much faster than competition and has about 1/10 or less of the market cap. I know this brokerage quite well and TRAD has many competitive advantages over more "conventional" online brokers.

For instance, it allows for automated trading and system trading. Also, their commissions are lower than the competition. I see TRAD taking market share from its competitors in the future.

4. General Overview

I held TRAD "for the long term" previously, but I sold with about a 20% profit. It was a shame, and the stock now is trading much higher. It seems to be technically overbought, but we know how trends can persist despite of overbought/oversold conditions.

If I want to hold an online brokerage, TRAD must be the one. Its market cap is less than 1/10 the one of its competitors, and revenues and profits are growing faster. The company has unique competitive advantages. The minute it wants to grab market share from competitors, it will, just based on price, if it wants too. But its trading platform is also much more advanced than any other (please make a demo or view their trading platform presentation here)

They used to charge for their platform, but not anymore, and since it's the best ... I also see TRAD as a takeover candidate from any other major online brokerage house, like Ameritrade or e*Trade (but it would have more potential if it continues alone).

The only risk that I see on a TRAD long term investment is the general market turning bearish. But I think one can't be afraid of a bear market when selecting individual stocks. If the general market turns lower I'll just open a short position at a weaker competitor to hedge things.

5. Trading Plan

I will buy $10,000 of TRAD around today's open for the Long Term on Fire Portfolio. In case we enter a bear market I may sell one of TRAD's weaker competitor's short to hedge my long term specific position on this online brokerage.

TRAD has had a strong year and it's only been a month   I almost bought around $13 in late December on the pullback to the 50dma .  An observation on the Long Term Portfolio (LTP). It's only a few weeks old and already 4/10 of the slots are taken. At this rate the portfolio will be full by March and, if all the stocks are held 2-3 years as planned, that would mean any new gems discovered between April 06 and let's say April 2008 could not be bought, at least not for the long term. Will be interesting to see how this situation plays out. 

I have been investing in TRAD since the first time you recommended it. I am still invested, but I have found that TRAD is very easy to trade in an out of also. 5 times I have sold TRAD at or near its latest high only to be able to buy it back again .50 to 1.00  or even 2.00 lower to catch the next trend upwards. Technically, I have never been as succesfull using technical signals to trade a stock that I like as I have been with TRAD. My most recent entry was at 17.25 and I am long 8000 shares having sold 200 today at 17.70 as I became a little concerned that we would not get through the 17.80s new high. I actually expected it to break to new highs tomorrow but the GOOG news will hurt the market overall so we may see it come back down to the support area in the 17. 20s /30s. I know this is not a thorough analysis but I just wanted to let you know that I find this stock extremely easy to read from the price cycles and have been very successful trading in an out while capturing most of the long-term action. IF I coudl do as well with other stocks I would make zillions!

This is from a free news letter that is delivered to my email door. They say that they receive no compensation for any companies that they reccomend.
As we nervously watch a stock drift downwards it is always good to read a report that says what you believe and hope. Long term up after a small retracement. Personally I got 1/2 in at 16.90 will commit the rest when I see good news and a turn around in the short term trend.

TradeStation (TRAD)
=============================
Why The Strength?

While bull markets benefit all stocks, they're particularly kind to companies that benefit directly from that bull market – brokers and investment houses. TradeStation is an up-and-coming Internet brokerage firm that tailors itself to professional and active investors, with state-of-the-art order execution and data availability, as well as the ability to create and backtest numerous trading strategies for stocks and futures. Business here has always been leveraged to the market's performance – when things are good, the number of trades (and hence,
revenue) booms, and thanks to its all-Internet operations, those higher revenues fall right to the bottom line. Right now, we see revenue growth accelerating, and from previously announced metrics, fourth-quarter growth should come in around 40%. A big market downturn would hurt, of course, but if this bull market persists, TradeStation should do very well.

Technical Analysis

From 1 at the end of the bear market, TRAD spurted ahead to 13 in 2003, as business recovered along with the stock market that year. But then, despite a grudgingly-advancing market in 2004 and much of 2005, this stock corrected and consolidated, building a huge, long base. The breakout didn't come until the end of October, when TRAD bolted to 12, and after testing that level numerous times over the next few weeks, the stock and RP line have shot ahead to new highs on huge volume. Earnings are due out February 14, and that's sure to have an impact on the stock's near-term action. Overall, however, we expect this uptrend to continue. You could buy a little up here, but a quick shakeout toward 15 would offer a great entry level.

Suggested Buy Range: 15-16 1/2

Thanks for your feedback and added comments 

TRAD may have a pullback here, or not, it doesn't matter for me as a long term investor in the stock. One can't be too concerned with the short term if he wants to invest for the long term. Probably that's why Warren Buffet doesn't have a ticker at his office. He doesn't care how his stocks are doing over the short term.

The same with TRAD. I know this brokerage has competitive advantages and that it will take market share from its competitors every year. The stock, futures and forex markets will never end, and traders will get more and more sophisticated. Trading volume always grows over the long term, so will TRAD's revenues and profits.

I'll continue holding TRAD for the long term.

Although I believe TRAD is a great stock to own on a long term perspective, the stock was overbought when I bought it. As a result we had a correction to the 50 day moving average and I'm losing about 12% on this position.

The 50 day moving average has provided strong support for TRAD in the past, let's see if history repeats itself (it usually does in the stock market) and the stock rebounds from current levels.

I'll continue holding TRAD for the long term whatever happens in the short term.

07:48     TRAD TradeStation beats by a penny, ex items guides for Q1 and FY06 (15.91 )

   Reports Q4 (Dec) earnings of $0.14 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.13; revenues rose 35.3% year/year to $27.3 mln vs the $25.9 mln consensus. Co issues upside guidance for Q1, sees EPS of $0.13-0.15 vs. $0.13 consensus; sees Q1 revs of $28-30 mln vs. $26.25 mln consensus. Co issues guidance for FY06, sees EPS of $0.54-0.65 vs. $0.59 consensus; sees FY06 revs of $119-130 mln vs. $111.43 mln consensus.

07:44      TRAD sees FY06 $0.54-0.65 vs $0.59 Reuters consensus; sees revs $119-130 mln vs $111.4 mln Reuters consensus - 2 analyst ests

07:37     TRAD TradeStation reports January metrics (15.91 )

   Co reports the following business metrics for Jan: 59,044 Daily Average Revenue Trades (DARTs), total client assets of $1.4 bln. Year over year, DARTs increased 49% and total client assets increased 18%.