If you're of a certain age, you've probably heard a financial planner say that you should have some money in fixed income - and the closer to retirement you get, the more you're supposed to own.
Now, I'm not going to wade into the lively debate about investing in bonds. Tens of millions of investors hold them, and there are probably just as many opinions.
But it does bring us back around to the existential question of 21st century investing: How do you collect any meaningful bond yields in a zero-interest rate market?
That's particularly pressing for investors over age 50 - or, really, anyone building a retirement fund for themselves.
Now, I've always believed that the road to a happy, prosperous retirement is paved with tech - even more so in an era of low to no interest rates.
And there's an entire bond market I know whose management's taken that very idea to heart. The leadership team is bringing that notoriously low-tech investment into the 21st century and, even now, reaping remarkable gains for their efforts.
So you don't have to be in bonds to make a lot of money from them...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Beat the Market, Own the Market
Now, as I said, the wisdom of investing in bonds is endlessly debatable. But whatever your view, it's an undeniable fact that quite a lot is invested in the bond market...
Last year, in the United States alone, trading volume hit nearly $40 trillion, when you add in other fixed-income securities. The near-universal search for yield since 2008 has meant that amount is up more than 50% in less than a decade.
And the volatility that's roiled stock markets since the "coronavirus correction" on Feb. 19, 2020, is certainly shaking the bond market, as well. After all, traders are scrambling because the Fed just cut interest rates again to help the economy bounce back from the COVID-19 shutdown.
And that's been the key to this company's remarkable success; it's up more than 39% since Feb. 19, whereas the S&P 500 is still down about 13%.
I'm talking about a very quiet but extremely significant player in electronic bond trading - the company that enables bond markets to function.
Rapidly Modernizing an Old Market
At a time when revenue in many sectors was plunging, MarketAxess Holdings Inc. (NASDAQ: MKTX) saw its order volume rise 51% to $916.6 billion.
That's the boost that's enabled shares to climb 33.7% from when the trouble started through to April 30.
No doubt, MKTX performance has been impressive. But it's the reason why the stock has done so well that is important to tech investors.
MarketAxess was founded in 2000 with the goal to bring electronic trading to the old-fashioned bond trading market, one of the last telephone-and-paper markets in America. Unlike stocks, which are traded through computers that find you the best available price, the vast majority of bonds are still traded by one broker calling up another.
For a market that sees $67 billion worth of bonds change hands every day, that's extremely inefficient, to put it mildly.
That's why MarketAxess's electronic trading platform has been such a hit. It allows you to stream live prices, price history, and the available bond inventory from all participating dealers.
Clients can trade instantly, without haggling over the phone. The company even lets you automate your bond trading strategies.
That's worth a great deal to clients. So it's no wonder MarketAxess now has more than 1,700 active clients, up 12% in the last year. More than 825 of those clients are international, a number that's also up 12%.
Meanwhile, 1,190 clients are using MarketAxess to trade emerging market bonds up 15% in a year.
That makes MarketAxess the largest company in the electronic bond trading space. But there's still plenty of upside ahead. Only a fraction of the bond market has moved to electronic trading.
So, not bad for a company whose Chief Operating Officer started his career as a plumber.
Unparalleled (and Unconventional) Fixed-Income Expertise
To be clear, COO Chris Concannon is now a long way from those early days.
Indeed, he was recently profiled in the prestigious Financial News. He's worked as a lawyer for the U.S. Securities and Exchange Commission (SEC), as Executive Vice President at Nasdaq, and as CEO and President of BATS Global Markets.
But his first job was as a plumber, at the age of 15. It was a job Concannon kept all the way through college, until he was 28 and started working at the American Stock Exchange.
Being a plumber appealed to him because "[he likes] to solve complex challenges that not everybody wants to solve," Concannon told Financial News.
He was hired by MarketAxess's visionary founder and CEO, Richard M. McVey, who is unparalleled in fixed-income markets.
Starting in 1992, McVey was managing director of JPMorgan Chase & Co.'s (NYSE: JPM) North American futures and options business. He then moved to be in charge of fixed-income sales and institutional client relations for North America.
He's exactly the man you want spreading the word about MarketAxess and the new services the company keeps bringing on. The growth story here practically writes itself.
As you've seen, the company's client list is growing by 12% a year. With each one, the word spreads that there is a cheaper and easier way to trade bonds.
At the same time, the bond market itself is growing, meaning that even if MarketAxess remained at its present, small market share, its revenue would still rise.
To boot, MarketAxess has very strong fundamentals. For this year's first quarter, the firm reported record sales of $169 million, up 36%. Diluted per-share earnings rose 41% to a record $1.96.
This is a company with nearly $357 million in cash and debt of just $98 million. Over the past three years, it has grown earnings per share by an average of 16%, putting it on pace to double in about 4.5 years.
The bottom line is this: This is a high-tech stock that powered through the coronavirus panic as though it had never happened. It's perfectly positioned to soar as the search for yield goes on and on.
And in the meantime, don't miss your chance to check out my colleague Tom Gentile's presentation for this opportunity...
You see, Tom has been tracking this little-known market for the last 22 months - and I've never seen anything like it.
There are hundreds of these opportunities being traded every day. And absolutely anyone can capitalize on them. So today, Tom's going to blow the lid off this thing - and show you how you can pocket gains like 473%, 631%, even 933%...
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About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.