5 Ways This Tech Leader Is Crushing a $700 Billion Market

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Michael A. Robinson

This time, Wall Street didn't freak out.

In fact, the S&P 500 had its best day in eight sessions last Thursday as stocks across the board entered a rally.

You can chalk that up to the fact that just the day before the Federal

Reserve struck a very dovish tone, suggesting interest rates won't rise far or fast this year.

What didn't get much notice is just how volatile the bond market had become over the past six weeks.

Here's the thing. Choppy bond trades by definition means there's quite a frenzy of both buying and selling.

And that's great news for savvy tech investors.

Let me explain. Even on a "calm day," the nation's bond market is highly active. We're talking a daily volume of $700 billion, more than three times that for stocks.

And it's our mission to look for a tech angle into this massive segment that will give us market-crushing profits.

Today, I'm going to reveal a firm that is doing just that.

And I'll show you the five reasons why this is the single best way to play this massive market…

Check it out…

Where the Money's At

Please don't misunderstand me. I'm in no way suggesting you bypass big tech winners and other equities in favor of bonds, even if we see higher interest rates ahead.

It's just that many investors buy bonds or bond funds for the income, and give up a lot of growth. But as I always say – avoid false dichotomies. You want at least a portion of your "fixed income" portfolio to give you so-so growth.

Otherwise, inflation can eat up a lot of your paper profits. If we could just capture a fraction of the bond market's amazing volume, we stand to make a lot of money.

Now, the U.S. stock market boasts roughly 6,500 shares traded on major exchanges. Though that's quite a lot to choose from, it's only a fraction of the more than 200,000 types of unique taxable bonds offered.

Here's the thing. Despite the rise of the Web and electronic trading, most broker dealers still buy and sell directly with each other. Analyst say that electronic bond trading only accounts for a little more than 20% of all transactions.

As you can see, that's quite a fertile field for MarketAxess Holdings Inc. (Nasdaq:MKTX). This is the premier high-tech firm serving the bond market, and it's a company with a lot of room to grow.

For instance, the tech leader in this space right now handles 95% of all electronic bond deals. But that is still less than 20% of all bond trades made today.

To show you why this exciting stock still has plenty of upside ahead, let's run it through my five filters for building wealth with market-crushing tech winners.

Tech Wealth Builder Rule No. 1: Great Companies Have Great Operations

I'm talking about well-run firms with top-notch leaders.

And MarketAxess Holdings has a CEO/founder who is second to no one in the fixed income market. Richard M. McVey began his career at storied Wall Street firm JPMorgan Chase & Co. (NYSE:JPM).

Beginning in 1992, he spent four years serving as managing director and head of JP Morgan's North American futures and options business, and then served as head of North American fixed income sales and institutional client relations.

Concannon has a Master's degree in business, as well as a law degree. He's also had stints at Nasdaq, Instinet, and Cboe Global Markets, one of the world's largest exchange holding companies.

And just a few weeks ago, at MarketAxess, McVey moved to strengthen the senior team. He named Chris Concannon as president and chief operating officer.

Tech Wealth Builder Rule No. 2: Separate the Signal from the Noise

To create real wealth, you have to ignore the hype and find companies that have rock-solid fundamentals.

The firm has that in spades. It boasts a 49% operating market, and a 27% return on equity. This is a company with nearly $267 million in cash, and stockholder's equity is seven times greater than the firm's total liabilities.

Right now, Wall Street looks at the bond and stock markets as plain binary choices. The heard doesn't seem to grasp the major fundamental here. As the world goes digital, there's plenty of upside for a firm that is leading the way.

While Wall Street busies itself handicapping the Fed's actions, our team at MarketAxcess is getting ready for more trading volume. They recently added a module that lets clients use data analytics to improve their bond trades, and now count more than 1,500 active clients.

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Michael A. Robinson

About the Author

Browse Michael's articles | View Michael's research services

Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.

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