This “Bond Buying” Company Could Climb 100%

bond buyingBonds lost $1.7 trillion in value last month, but Money Moring Director of Tech & Venture Capital Research Michael A. Robinson sees a massive profit opportunity. In fact, he’s found one bond-buying company that could provide triple-digit profits in roughly three years.

Robinson’s pick is in the growing market of electronic bond trading. Currently, electronic trading accounts for 20% of all bond transactions.

The bond-buying company Robinson is watching handles 95% of all electronic bond deals, and he believes there is plenty of room for growth.

“Electronic trading has become the standard way in which nearly all financial transactions take place today,” Robinson said. “However, the bond market is only just now moving into full digital trading. That gives the firm a long runway to ride the electronic shift.”

It’s true the bond market may not look as appealing right now as stocks. And Robinson believes there are three reasons bonds have lost value in November.

“First, there's Donald Trump's aggressive economic stimulus – including that $1 trillion infrastructure plan. Second, traders are moving their cash into a very attractive stock market. Third, the Fed will likely raise rates by the end of the year. All three of these are bad for bonds – hence the $1 trillion rout we saw over the past week or two,” Robinson said on Dec. 1.

But Robinson is focusing on the bigger picture…

Editor’s Note: A door has opened for an ultra-rare but powerful anomaly in the stock market… It involves a precious metal, one that's considered exceedingly more rare than gold.Get all the details.

According to Robinson, markets are missing the role bonds play for retirement funds, conservative investors, and institutions. There are more than 200,000 types of unique taxable bonds offered, giving investors a lot of options.

“And so this market for fixed-income investments remains both active and huge – $40 trillion huge,” Robinson said.

That’s part of the reason why he sees this bond-buying company potentially climbing 100% in roughly three years.

Here’s the bond-buying company Robinson recommends and his price target…

This Bond-Buying Company Could Climb 100% in Three Years

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buying bondsThe company Robinson recommends is MarketAxess Holdings Inc. (Nasdaq: MKTX). It’s an electronic trading platform that allows investors worldwide to trade corporate bonds and other fixed-income instruments.

MarketAxess also offers fixed-income market data, compliance tools, and analytics to help its clients.

MarketAxess has increased its client base by 30% since September 2014, and had an average sales growth rate of 17% between 2010 and the end of last year.

And even if investors sell bonds to move into equities, MarketAxess still makes money. You see, it doesn’t matter if people are buying bonds or selling them; as long as trading volume is high, MarketAxess gets the business.

Robinson says that a Fed rate hike in December would actually be a good thing for MarketAxess, because it means trading volume will rise sharply.

The Rule of 72 Explained

The exact formula is complicated. But the Rule of 72 shows you how long it could take to double your money at a given annual rate of return. For example, you take the compound growth rate of MarketAxess (22%) and divide it into 72. That means it will take just over three years to double your money.

Because of its growing dominance in the electronic bond market, Robinson is projecting earnings per share (EPS) will grow by an average of 22% over the next five years.

By using the Rule of 72, it should take roughly three years for MKTX stock price to climb 100%. With an opening price this morning (Friday) of $163.41 per share, that means MKTX could trade for nearly $330 per share (for a full explanation of the Rule of 72, check out the sidebar to the right).

As the bond markets shift to using more technology, Robinson says this is a stock to buy and hold for years to come.

The Bottom Line: MarketAxess is a bond-buying company that is making buying and selling bonds easier for investors. MarketAxess accounts for 95% of all electronic bond deals, and it’s increased its client base by 30% in a little over two years. By the end of 2019, the MKTX stock price could climb close to $330 per share.

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