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When everything is going down, the best mindset to have is a long term one. Longstanding stocks such as MarketAxess Holdings Inc. has fared well over time in a volatile stock market, which is why it’s my top pick to invest in. Below I take a look at three key characteristics of what makes a strong defensive stock investment: its size, financial health and track record.
MarketAxess Holdings Inc., together with its subsidiaries, operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments worldwide. Started in 2000, and run by CEO Richard McVey, the company provides employment to 454.00 people and with the company’s market capitalisation at US$13b, we can put it in the large-cap stocks category. Bear market volatility can have a short-term impact on large, well-established companies, but in the long-run, these businesses are likely to prevail. This is because fundamentally, nothing has changed. A fall in share price is hardly detrimental to its financial health and business operations. So, large-cap stocks are a safe bet to buy more of when the stock market is selling off.
With zero debt on its balance sheet, MarketAxess Holdings isn’t constrained to debt obligations and covenants, which can be burdensome during financial downturns. Highly-levered companies have to maintain a cash cushion to meet near-term interest payments as well as meet unforeseen circumstances. With no lenders’ needs to tend to, MarketAxess Holdings enjoys financial flexibility and independence – an invaluable position to be in during bear markets. Its current cash position of US$345m is enough to meet near-term liabilities, placing it in a financially robust standpoint in the face of uncertainty.
MKTX’s annual earnings growth rate has been positive over the last five years, with an average rate of 20%, overtaking the industry growth rate of 16%. It has also returned an ROE of 28% recently, above the industry return of 24%. This consistent market outperformance illustrates a robust track record of delivering strong returns over a number of years, increasing my conviction in MarketAxess Holdings as an investment over the long run.
Next Steps:MarketAxess Holdings makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with MarketAxess Holdings? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I’ve put together of other things you should consider before you buy:
- Future Outlook: What are well-informed industry analysts predicting for MKTX’s future growth? Take a look at our free research report of analyst consensus for MKTX’s outlook.
- Valuation: What is MKTX worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MKTX is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.