November 23, 2007

eTrade's Losses Are Investors' Gain

The last time I mentioned eTrade's issues, I said I had bought in to the stock around $5.50, following a small recovery after bad news swirling around the company had decimated its market value. Not seeing the kind of continued growth I had expected right away, I sold my position a few days later around $5.65. I'd made a few hundred bucks, but nothing to write home about. But now I'm back in, and it's a different story - one that could be much more profitable.

After I sold on November 16th, eTrade stock resumed its collapse, falling below $4 a share - signaling to me the right opportunity to resume my eTrade gamble (Partly due to this article). So on Wednesday morning, I put a sizable chunk back into the stock, now at $3.89 a share. It looks like it may have been the right move, as while rumors of a potential merger with or TD Ameritrade have been swirling, the stock jumped about 25% today, ending at $5.33 a share, giving me a 37% gain in a two day period, and an "on paper" profit of more than $3,500 so far.

Why play eTrade? Because I believe they have the best brand among online brokerages, and that their customer base will be a valuable commodity, even if they are sold or merge with a competitor. It's also likely the eTrade name would be kept, if not too damaged. After all, who wants a new name like TDAmerE*Trade or An eTrade customer can only benefit from this.

As an investor, I believe my funds are safe, and that the value of the company is higher than it is today. I've made more than my fair share of bad stock trades in the past, whether from premature selling or simply bad buying, but I'll be watching this one close, hoping it turns out well.

(Also see: Silicon Alley Insider: E*Trade On The Blocks? Probably., BusinessWeek: E*Trade: The Merger Buzz Grows, or E-Trade Shares Spike on Takeover Talk)