Higher interest rates and increased uncertainty among investors and economists alike have seen the FTSE 250 down over 20% year to date. Many investors have turned away from equities as a result. However, I’m confident that I may not have to hoard cash in my Stocks and Shares ISA to protect my gains.
Despite all the negatives in current market fundamentals, I’ve noticed two trading platform shares that seem to thrive on it, with impressive balance sheets, past performance, and dividends.
Why are trading platforms thriving
Trading platforms that specialise in providing solutions to retail traders who are looking for rapid execution, and short-term positions benefit from a very profitable business model. These traders, more experienced in financial markets and keen to take on higher risk, make a high number of trades regularly compared to traditional investment accounts.
The popularity of trading apps particularly has seen tremendous growth. Traders in these markets will also often use leverage on their position, allowing platforms to collect revenue from interest swaps as well as their markup on each trade.
The cryptocurrency bull run of 2021 certainly helped fuel demand for such trades, but since then uncertain equity markets have been just as attractive to opportunistic traders seeking volatility.
Plus500
The first of these shares is Plus500 (LSE:PLUS). The Plus500 share price boats 25% year-to-date growth at the time of writing. This follows several positive outcomes, compared to market expectations, in the company’s financials.
Earnings for Plus500 have grown to all-time highs of approximately £801m – 22.57% year-to-date – however, its profit margins (44.80%) are lower than they were last year (53.10%).
Plus500’s balance sheet is cash-rich and debt-free, meaning a rising base rate is unlikely to be of concern. It also positions it well to achieve the board’s plans for US expansion and targeting acquisitions as announced by the CEO, David Zruia, following the interim report.
I’ve held Plus500 shares since 2021, and I’m looking at possibly adding to my position while retail traders still seem keen on high risk, particularly when the current 6.8% dividend yield is on offer.
IG Group Holdings
IG Group Holdings (LSE:IGG) is my second strong contender for medium to long-term growth. The share price is down 8% year to date as I write – respectable losses compared to the FTSE 250.
IG Group has a similarly strong balance sheet, however. The full-year 2022 results showed revenue at approximately £965m, up 13% from last year’s results. Profit margins decreased to 41% from 44% in FY2021, a lesser decline than Plus500.
With earnings per share also exceeding analyst estimates by 6.7%, this leaves market expectations optimistic, with forecast revenue growth of 5.5% next year.
IG’s current dividend yield stands at 5.83% but, unlike Plus500’s, has been steadily increasing on average over the last five years.
I’m keeping a close eye on IG Group, as I think it has the potential to provide competitive dividend income as well as share price growth that is, most importantly, sustainable.