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Turnaround Year for E*Trade

Posted February 19, 2008

"After a steep dive from $25 to $2 and change, insiders are betting big that 2008 will the E*Trade Financial’s (ETFC:NASDAQ) turnaround year." — Ian L. Cooper

By Ian L. Cooper, Small Cap Trading Pit

Baltimore – (TFN): The following was taken from this week's 60-Second Buzz on TFN. Watch this video.

After a steep dive from $25 to $2 and change, insiders are betting big that 2008 will the E*Trade Financial’s (ETFC:NASDAQ) turnaround year. Since January 30, 2008, ten insiders bought 461,649 shares between $3.99 and $4.06 on January 30, 2008.

But what’s most impressive is that they bought after a one-month triple digit move on the stock off $2 lows. That alone speaks volumes on confidence, which may explain last Thursday’s call option volume on February 4 and 5 calls, as well as March 5 and 6 calls.

Rather watch the financial video? Click here.

Sure, the stock took a major dive in 2007, but that’s because it got itself involved in a business it shouldn’t have been in – subprime. Fortunately, as highlighted by insider moves, there’s a good chance the bad news has been factored in. Yes, they posted a loss after a $2.2 billion charge related to the sale of the asset-backed securities portfolio, but the company also unveiled a turnaround plan that could return the company to profitability this year. 

Better still, bullish moves have already been made by the company. In November 2007, for instance, the company sold a part of their mortgage portfolio to Citadel Investment, and secured $2.55 billion cash infusion. Plus, it’s exiting its institutional trading business, which means it’ll have more time to focus on retail banking and brokerage operations – something it should have been doing all along.

As for potential upside, a near-term fill of the $8 gap isn’t out of the question, considering low valuations and attempts at a turnaround.

Read a TFN Research Report outlining a specific E*Trade options play.

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