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Does MarketAxess Holdings (MKTX) Have a Long-Term Growth Trajectory?

Soumya Eswaran
·4-min read

Brown Capital Management, an investment management company, released its “The Brown Capital Management Mid Company Fund” first quarter 2024 investor letter. A copy of the letter can be downloaded here. The Mid Company Fund (Institutional shares) returned 5.21% in the quarter underperforming the 9.50% return for the Russell Midcap Growth Index. The strategy focuses on companies that offer mission-critical products and services that save time, lives, money, and headaches. In addition, check the fund’s top five holdings to know its best picks in 2024.

The Brown Capital Management Mid Company Fund highlighted stocks like MarketAxess Holdings Inc. (NASDAQ:MKTX), in the first quarter 2024 investor letter. MarketAxess Holdings Inc. (NASDAQ:MKTX) is an electronic trading platform for institutional investors and broker-dealer companies.  The one-month return of MarketAxess Holdings Inc. (NASDAQ:MKTX) was -5.96%, and its shares lost 25.18% of their value over the last 52 weeks. On June 25, 2024, MarketAxess Holdings Inc. (NASDAQ:MKTX) stock closed at $194.05 per share with a market capitalization of $7.354 billion.

The Brown Capital Management Mid Company Fund stated the following regarding MarketAxess Holdings Inc. (NASDAQ:MKTX) in its first quarter 2024 investor letter:

"MarketAxess Holdings Inc. (NASDAQ:MKTX) is a leading electronic-trading platform for fixed income securities. The company is one of the largest institutional electronic-trading venues for previously issued emerging-market, U.S. investment-grade, and U.S. high-yield debt, with leading market share in each category. Currently, the U.S. fixed income market is conducted mainly via over-the-phone transactions. Electronic trading represents less than one-third of trading volume in the fixed income categories that MarketAxess targets, which is well below the penetration rate of other asset classes such as futures and equities, where 70% to 90% of trades occur electronically. By facilitating electronic trading, the company’s innovative technology solutions offer customers greater efficiency, cost savings and improved trading liquidity, all essential to customer operations. In addition, MarketAxess has opportunities to expand its product line into new fixed income markets, such as municipal bonds and U.S. Treasurys.

During the first quarter, MarketAxess’s share price underperformed due primarily to recent market-share losses. Lower volatility combined with strong new issuances, which do not typically trade electronically, had an impact. In addition, portfolio trading—transacting a basket of different fixed income securities in a single trade rather than executing each bond separately—along with dealer-to-dealer transactions, showed robust performance. These areas have previously been identified as comparative weaknesses for the company. MarketAxess is addressing these shortcomings by introducing additional features and functionality, including the X-Pro trading platform that integrates real-time data, pre-trade analytics and trading protocols to enhance client productivity. While this current weakness will likely weigh on near-term results, we believe electronic bond trading will become the dominant form of trading over the longer term, providing many years of attractive and profitable growth."

A trader in a busy trading room, surrounded by real-time market data and automated execution services.

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MarketAxess Holdings Inc. (NASDAQ:MKTX) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held MarketAxess Holdings Inc. (NASDAQ:MKTX) at the end of the first quarter which was 27 in the previous quarter. MarketAxess Holdings Inc. (NASDAQ:MKTX) delivered revenue of $210 million in the first quarter, up 4% from Q1 2023. While we acknowledge the potential of MarketAxess Holdings Inc. (NASDAQ:MKTX) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

We discussed MarketAxess Holdings Inc. (NASDAQ:MKTX) in another article and shared Wasatch U.S. Select Strategy's views on the company. Carillon Eagle Mid-Cap Fund commented on MarketAxess Holdings Inc. (NASDAQ:MKTX) in its Q1 2024 investor letter stating that the shares lagged during the quarter. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.