This is bit of a newbie question, but has anyone researched the stock of CME Group? It has a lot of cash, low debt, low price to book, very strong profit margins. I think it has a strong economic moat, I’m not quite sure who could infringe upon it, and I think it will be consistently profitable. ROE is not good though as their assets are very high. I’m wondering why the P/B is so low, if anyone has any opinions on CME, I’m quite interested to know .
There was some fear the Volker rule would hurt trading volumes. Also their main business is interest rate derivatives and interest rates have been fairly steady. Should do well as managers start to put on more hedges or use futures to shorten their duration ahead of any major changes in the yield curve. I would pay more attention to trading volume and earnings. Price to book is not that important for the exchanges.
Yes, I looked at CME group before. It was the first group of stocks i looked at when i first started investing. I ended up buying TMX group and HK exchange. TMX was sold later though. Their “moat” is actually quite weak as they will rely even more on price competition going forward as there are a whole bunch of smaller exchanges that will eat into their profits. I think Deutsche Bourse might be a better buy though they face the same industry economics. TMX group also if you like the exchanges and don’t mind paying for the CME valuations. book value matters very little as the previous poster says.
Appreciate the input, why does ROE not matter much for exchanges? I had thought their main business was commodity futures, and regarding their “moat” wouldn’t participants want to trade in the most liquid marketplace with the most participants? btw, I’ve been searching online for discussion boards for investment topics, are there other ones besides the TMF boards?
ShintreH Wrote: ------------------------------------------------------- > Appreciate the input, why does ROE not matter much > for exchanges? I had thought their main business > was commodity futures, and regarding their “moat” > wouldn’t participants want to trade in the most > liquid marketplace with the most participants? > > btw, I’ve been searching online for discussion > boards for investment topics, are there other ones > besides the TMF boards? I think I am incorrect here. Book value does matter when evaluating businesses of any sort, but just less so than for Banks, Insurance Companies, P/E firms. The reason is, they’re not an intensively “capital” or “equity” driven sort of business.