Wednesday, May 13, 2009

E*Trade Monthly Statistics Give Investors Hope

Today, E*Trade (ETFC) released its monthly customer statistics, and the statistics were pleasantly surprising.

The full run-down of statistics can be found here on Yahoo! Finance, but I'll summarize some important stuff below:

Total gross new accounts:

75,624
Net new accounts:

29,393
End of period total accounts: 4,518,638
Total customer assets:
$ 121,779,000,000

Also:

"Total Daily Average Revenue Trades (“DARTs”) increased 7.2 percent sequentially and 34.5 percent from the prior year to 230,345." Plus, "Asset flows continued to be positive, as the Company realized $300 million in net new customer assets during April, marking the seventh consecutive month of positive inflows." (quoted from linked article).

ETFC's brokerage business is obviously healthy, which is an encouraging sign considering the overall company's murkier picture. ETFC recently announced that it would sell $150 million in common stock, boosting capital reserves to meet regulatory requests. The shares would be sold "from time to time at market prices" by JP Morgan.

As I wrote in March, ETFC shareholders will have to wait and see if the thriving brokerage business can endure and outlast losses from the asset-holding component of the business. The capital raise and continued healthy customer statistics are promising, though the battle is likely far from over.

I have accumulated some more shares of ETFC over the past few weeks after shares fell nearly $1 from the recent highs near $2.50. I plan on continuing to occasionally buy shares on weakness as long as ETFC's business doesn't change materially.

On a final note, I'd like to criticize another analyst (partially because my material is often scrutinized by commenters here and on Seeking Alpha). where he did a great job demonstrating that he knows nothing about E*Trade.

He writes "Either way this is a brokerage growth story." Sorry, Aristotle, but that is incorrect; it is a story of inadequate capital cushions to cover losses on portfolios of mortgages and other troubled assets. Any naive investor who thinks about buying ETFC shares based on that article will have been horribly misled.

It is very dangerous and unprofessional for Motley Fool editors to let that article hit the internet. As someone who has been criticized for not thoroughly researching, I don't know how a professional writer can publish an article where so much material information is omitted. Shame on you, Motley Fool.

On a related note, I'm available for hire for freelance writing. Motley Fool, if you're interested, feel free to contact me at studentstocks@gmail dot com.




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