Value Investing

Greenhaven Road: The Future Of Interactive Brokers

Greenhaven Road: The Future Of Interactive Brokers

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Greenhaven Road

Who We Are

  • A long-biased hedge fund.
  • Concentrated and patient.
  • Pursue both quality companies (compounders) and special situations (spinoffs, rights offerings, SPAC, etc.)

Operating Background of Portfolio Manager

  • Managed a manufacturing business after graduating college.
  • Co-Founder of Acelero Learning. Several roles including CFO, CTO, Chief Strategy Officer, and currently board member. Acelero has grown from three co-founders in a tiny office to1,100+ employees in 15 states.
  • A touch of traditional-Worked in private equity, a long/short fund, Stanford MBA.

What I Believe

  • Fundamentals matter,balance sheets matter, cash-flow matters, management matters, and incentives matter.
  • An investment committee of one is the perfect size – the aspiration is to be a small boutique manager.

Performance History Throughout Life Of Strategy

Strategy and fund have outperformed relevant indices.

Greenhaven Road Interactive Brokers

Interactive Brokers

Greenhaven Road Interactive Brokers

Business Description

  • The Company’s Words: Interactive Brokers “Provides trading solutions for institutions and investors”. They are the largest on-line broker by trade volume.
  • Glass Half-Empty View: Limited float,volatile earnings, and expensive.
  • My View: Highest margin, lowest cost broker with a very long runway ahead of it and secular tail-winds behind it.

The Past And The Future

The Roots are in Market Making

  • 1977: Thomas Peterffy, the Chairman of the Interactive Brokers Group, buys a seat on the American Stock Exchange (AMEX) and becomes a member, trading as an individual market maker in equity options.
  • 1982: Timber HillInc. is formed. Initially, the company trades equity options at the AMEX, clearing through Spear, Leeds & Kellogg. Traders receive telephone instructions identifying pairs and prices.
  • 1993: Interactive Brokers Inc. (now known as IB LLC) is incorporated as a U.S.broker-dealer, making Timber Hill's vast intercontinental electronic network and trade execution services available to customers.

The Future is Brokerage

  • 1999: IB begins to clear online trades for customers trading stocks and equity derivatives through the IB system.
  • 2005: IB is ranked the #1 software based broker, and #1 for lowest trade cost by Barron's.
  • 2011: Interactive Brokers becomes the largest online U.S.broker as measured by Daily Average Revenue Trades reported.
  • 2013: IB's Hedge Fund Capital Introduction ramps up with 60% of funds receiving at least one investment and the funds reporting an average 2013 rate of return of 20%.*

The Future Of Interactive Brokers

“I'm obsessed with trying to grow this to become the largest brokerage in the world. That's the only thing I care about.” -Thomas Peterffy, CEO Interactive Brokers, Q1 2016 Earnings Call

Key Statistics

Healthy, Growing, and Profitable

  • Largest US Electronic Broker: As measured by revenue trades
  • Industry Leader: Was recognized by Barron’s for 6 straight years as the #1 electronic broker
  • Global Reach: Access to 100+ markets in 24 countries
  • Consistent 15% + Customer Account Growth: The company has consistently grown accounts for the past several of years. Brokerage is the future.
  • Scalable and Efficient: $1.1M net revenue/employee

Greenhaven Road Interactive Brokers

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