England is beating the competition on the football pitch right now and is in the final of the Euros. In the stock market, I’m seeing a similar theme with some UK shares outperforming their international competition. I’ve spotted one example in the FTSE 250 that’s making me seriously consider adding it to my portfolio.
Strong performance
I’m talking about CMC Markets (LSE:CMCX). The company is a financial trading and investing platform, based in the UK. Via the platform, a user can buy and sell a wide variety of assets, including stocks, bonds, currencies and much more.
Over the past year, the stock has jumped by 120% as the business continues to grow and expand into new markets. The share price continued to rally last month, partly due to annual results that were released. The earnings report showed net operating income rose by 15% versus last year, helping to boost profit before tax by 21%.
The future looks bright from here too. The report noted “new product launches and further technological upgrades” that are coming in the next year. This should help to attract new clients and deepen existing ties with current clients.
It’s also seeking “opportunities to drive further cost efficiencies and deliver margin expansion.” This is important, because sometimes growth stocks ignore keeping a lid on costs. It doesn’t matter if revenue is growing if costs are spiralling out of control!
The US alternatives
One criticism of the UK stock market is that it has lagged behind the US over the past year or so. This isn’t the case when it comes to some specific examples. In the US, Charles Schwab is a very similar company to CMC Markets. It offers investment and trading accounts for clients. Although it also has a broader wealth management division too, it’s know for it’s brokerage facilities mainly.
Over the past year, the Charles Schwab share price is up 30%. Don’t get me wrong, this is a good performance. However, it’s nowhere near the growth of CMC Markets.
Interactive Brokers is another US firm that operates in the same space as CMC Markets. It offers an online platform where clients can go on and trade. Over the past year, the stock is up 45%.
It’s true that both of these US peers are much larger than CMC Markets by market cap. Yet as an investor, I’d prefer to own a smaller stock that has a share price growing faster. This means that it can grow more without running out of potential due to a large market cap.
Tying it all together
The main risk I see is that as CMC Markets continues to expand around the world, it could lose its edge. It might become too big too soon and become less profitable based on inefficiency. Further, if it tries to crack the US market, it will find itself directly up against Charles Schwab and Interactive Brokers.
Despite this, when looking for exposure to this sector, I much prefer the FTSE 250 option over the US alternatives.
