Buyout Talk Boosts Ameritrade

Is TD Ameritrade (AMTD) an acquisition target?

Shares of the online broker have jumped 25% since the end of the first quarter as a merger-and-acquisition wave led by private equity has lifted U.S. stock markets to record highs.

Bulls on the online brokerage stocks expect the market rally to draw individual investors back into the market. The hope is that a rising market could revive sagging online trading volumes at Ameritrade, E*Trade Financial(ETFC) and Charles Schwab(SCHW). TheStreet.com's Steve Smith recently broached this notion in discussing second-quarter earnings prospects for the group.

But with practically every sector of the economy immersed in a wave of consolidation, some observers say Ameritrade could also be a buyout play.

"People do anticipate consolidation in the space," says Joe Capone, a hedge fund manager who owns Ameritrade shares. Capone is a contributor to RealMoney.com, TheStreet.com's investing ideas Web site.

Several hedge funds took new positions or added to existing stakes in Omaha, Neb.-based Ameritrade during the first quarter, according to Securities and Exchange Commission filings.

Atticus Capital now owns 3.97 million shares of TD Ameritrade. D.E. Shaw and Caxton Associates, among others, also bought small stakes in the company last quarter. (According to SEC filings, Atticus and Caxton had purchased options or small outright positions in the company in prior quarters.)

Brad Hintz, an analyst at Sanford Bernstein who does not cover TD Ameritrade, says brokers that serve retail investors are popular with hedge funds, because trading volumes tend to reflect the general mood of the equity markets.