Opinion on  E*Trade Financial Corp (ETFC)     Sector: Financial  >  Industry: Investment Services
I am going to do for E*Trade what Prince Alwaleed did for Citi

E*Trade is what all value investors love: a one-time fixable problem. It won't go bankrupt.  It might be bought by a competitor like Ameritrade.   The recent new share issuance will help them clean up their balance sheet and make them more attractive to a suitor.  t is trading for peanuts because everyone hates financials and brokers especially, as they underform during recessions.  The old, underperforming management has been tossed out.  Sure, there might be further unexpected writedowns out there, but the worst is over.  I will use those times to snap up shares on the cheap.  It's selling for less than book value. 
  It will not be a comfortable ride to $6.  There will be fits and starts.  A time will come when C or BAC or some other big bank or broker will get hammered and this stock will go along for the ride.  Do not push "EJECT."  Read the lastest 10-Q .  They have pretty much contained the problems on the banking side and the brokerage biz is growing really well.  Stay the course.  This won't turn out like Iraq. 

SmartMoney magazine just named ETFC the best online discount broker .  Why is this important?  If you were a potential acquirer, would you be willing to pay a premium over the 1.88 Billion market cap of ETFC for one of the best brands in the online brokerage business?  It's very easy to just focus on what the market says a stock is worth, but it can't help to think about what a private or strategic buyer might pay. 

E*Trade is selling assets left and right and will take another capital infusion from Citadel.    While dilutive in the short term, it will keep in the game long enough for things to turn.  Think Ali in the Rumble in the Jungle against Foreman. 

This is from Marketwatch

NEW YORK (MarketWatch) - Online brokerage E-Trade said Thursday that it had launched a mobile platform for BlackBerry smart phones from Research In Motion that will allow customers to make the same banking and trading transactions remotely that the company offers online. The E-Trade Mobile Pro will have free real-time streaming quotes, remote transfers, all trading capabilities, live watchlists and portfolios, and a view of all E-Trade accounts on one screen. The new platform will be made available to all E-Trade Securities customers by July 1 at no additional cost.

This move should increase the value and ubiquity of the ETFC brand.

S & P upgraded ETFC, saying that it believes they're telling the truth about future writedowns and the overall financial condition of the company.  I know.  It's pathethic when a public company is singled out for telling the truth to its investors, but that's how absurd things have become with the financials.  See Lehman Brothers for an example of the lack transparency in this industry.
   ETFC is going to continue to get slaughtered for awhile because the rest of the sector stinks.  Once again, I would use this as an opportunity to average down on your basis cost. 

Read the monthly activity report for E*Trade .  ETFC's core brokerage business is getting better bit by bit.  They are adding assets and activity is increasing. 

The stock is trading around $3 a share.  They've been hit with a $1 million dollar find for not properly complying with anti-money laundering laws.  The second quarter loss was wider than expected.  There was nothing to be hopeful about in the guidance. Goldman Sachs says that they won't be profitable for another two years.

The sky is not falling.

Take a closer look at the loss.  It was due to setting aside more money for loan losses.  The core retail business, while hurting, is still turning a profit, and signing new accounts.  Once again, I'm averaging down in order to lower my basis costs.  E*Trade is still a viable business.  They have taken the necessary steps to raise sufficient capital in order to weather the storm.