2 Best Fintech Stocks to Buy in April
Fintech companies bring finance and technology together, and two companies that are crushing it are Tradeweb Markets (TW 1.60%) and Interactive brokerage group (IBKR -0.81%). Both companies have been at it for decades, modernizing the trading process and bringing it into the technological age.
These fintech stocks are at the top of their game and have grown at an impressive clip by delighting clients with their respective trading platforms. Here’s why they’re solid April buys.
Tradeweb Markets modernized trading for Wall Street’s most prominent investors
Tradeweb Markets is a one-stop shop that helps the most prominent Wall Street players trade a variety of products. Introduced in 1996 to modernize US Treasury bond trading, Tradeweb is one of the earliest fintechs.
Tradeweb brought a technological solution to a trading market that previously relied on telephone orders to make trades. It has since expanded to many products, including European bonds, corporate debt, municipal bonds, equities, money markets and derivatives.
Image source: Getty Images.
The secret to success is providing first-class customer service and considering customer needs when designing the platform. A couple of years ago it bought, for example Nasdaqits fixed-income trading platform for $190 million to improve clients’ access to government bonds while reducing trading costs.
Another way it appears to customers is by protecting their trading information to prevent sophisticated investors from pre-running their orders and increasing transaction costs.
The proof is in the pudding, and Tradeweb has increased market shares for several years across its various products. For example, since 2016, Tradeweb’s share of the US financial market has grown from 7.5% to 19.7%. It has also seen an increasing market share in credit products, shares and money market funds.
Image source: Tradeweb Markets. UST = US Treasury bonds.
Last year was fantastic for Tradeweb, which achieved its 23rd consecutive year of revenue growth. Record activity in high-yield debt, emerging markets and other US credit products boosted earnings growth during the year.
Tradeweb is firmly positioned to continue expanding its business and take market shares. One way to expand this market share is to collaborate with Black stoneits Aladdin platform, where it will bring its credit trading solutions to Aladdin’s execution management system.
Interactive Brokers’ technology-first mindset has resulted in amazing margins
Like Tradeweb, Interactive Brokers brings electronic brokerage services to investors. It focuses on tech-savvy retail investors and offers its platform to hedge funds and proprietary trading firms. Over the past five years, Interactive Brokers has grown its client base by 34% annually; last year it grew by 25%.
Interactive Brokers’ secret to success is their commitment to automating as much of their business as possible. It’s on a roll, and most of the top executives are software engineers committed to automating as much as possible. This commitment to automation makes Interactive Brokers the low-cost provider of choice. It also means the company can operate efficiently, and lower costs help it produce high margins for investors. In 2021, the pre-tax margin of 67% outperformed its peers; last year the margin increased to 71%.
Image source: Interactive Brokers.
Another thing being worked on is building an auction model for options and share trading. This contrasts with the pay-for-order flow model, which brokers like Robin Hood sell client orders to a single market maker who will execute the trade. An auction model would match what regulators want to see from all brokers and should help clients get better prices for their orders – something Interactive Brokers hopes could attract even more customers.
The company also has a rock-solid balance sheet with $100 billion in liquid assets and no debt. And while other tech companies are laying off employees, Interactive Brokers is adding them as they continue to automate their business and grow their market share.
