Time To Take A Closer Look at the NYSE Group

Any fan of Mad Money knows that Jim Cramer’s 2007 number one “growth stock of the year” is the NYSE Group (NYX), typically referred to as the New York Stock Exchange. Turns out viewers of CNBC’s Fast Money television show found out that three of panelists from Fast Money really like the New York Stock Exchange too.

During Thursday night’s (3/15/07) airing of Fast Money, a segment was devoted to discussing the Exchange stocks due to the news of Intercontinental Exchange making an offer to purchase the Chicago Board of Trade. Turns out Jeff Macke, Tim Strazzini and Guy Adami all favored New York Stock Exchange as their current favorite Exchange stock. When Dylan Ratigan asked Eric Bolling what his favorite exchange stock was, Bolling simply replied with “All of them”.

So, with NYSE Group’s stock down approximately 26 dollars since January 8th, 2007 why does this stock get such high endorsements from Mad Money and Fast Money?

While I can’t speak for them, I can take a moment to take a look at some of the highlights for the NYSE Group:

NYSE, Euronext deal expected to close this April

Euronext reported 2006 net profit increase of 50.8% to $475.4 million, revenues increased 14.6%.

On 3/14/07 Euronext.liffe reported a new daily trading record.

NYSE and Euronext are transitioning to more efficient electronic trading models.

Looking to continuetheir global expansion, Asia is speculated to be the next move for the NYSE.

Alliance with Tokyo Stock Exchange.

5% Stake in National Stock Exchange of India.

Share lockup has passed (3/7/07)

Since the share lockup just passed recently we could continue to see pressure on the stock. However, with Euronext merger nearing completion and endorsements from Jim Cramer, Jeff Macke, Tim Strazzini and Guy Adami, now could be the time to start taking a closer look at NYSE Group.

Disclosure: Author holds a long position in NYX.

NYX 1-yr chart

Comments

[cohenbarryj:]

Just a few thoughts on the subject. First, NYX is not a monopoly like so many other exchanges, it face serious competition from a number of domestic platforms. Second, for all intensive purposes it is a one product exchange; cash U.S. equities. Third, while many speak about the fact that Reg NMS changes will substantially increase volumes do to statistical arbitrage, pricing will also be negatively effectived. The EuroNext deal is more of a marriage to save each other rather then the best deal (just my opinion). NYX did it to get diversified product (they saw the writting on the wall) and EuroNext did it so they can keep their JOBS. The question is what is all the hype is worth. What is the real earnings power of NYX (without EuroNext) what is it really trading at. For a company that promotes the most open and fair market in the world as a company they are far from that. Have you ever listened to a conference call? These guys don't want to tell you what the tax rate would be b/c it constitutes "foward looking statements." Give me a break.

2007 Mar 19 11:22 AM

[codyfaller:]

Thanks for the counter-argument. A great trader needs to get very acquainted with the mindset of those on the other side of the trade. NYSE is obviously addressing concerns about being a one-trick pony...partnering with Luxembourg to trade corp. bonds is yet another step toward capitalizing on the consolidation in the space. Seeing the writing on the wall and taking action to stay in the game is what good manangement does. The numbers with EuroNext are solid, and at this entry point, investors are likely to be very pleased 1 month, or even 1 year from now. Thanks again for your thoughts.

2007 Mar 23 01:48 AM