Today's sector in focus is the exchange sector. The exchanges were all very much in favor just a year ago, and many were hitting new 52 week highs. Fast forward to today and you have many of these stocks much closer to their 52 week lows than their 52 week highs. Recessionary fears seem to have hit the exchange stocks, but is the fear justified?
Let's take a look at some of the individual stocks in this group.
- NYSE Euronext (NYSE:NYX) Year to date this stock has lost 27.77% of its value. The company has been hounded by concerns over the integration of the merger between NYSE and Euronext. Investors are becoming impatient in wanting to see the merger be accretive to the overall company's earnings.
- CME Group (NYSE:CME) This stock has fallen almost 34% year to date. The company has a $9 billion pending buyout of competitor Nymex Holdings hanging over it. There has been some opposition to the deal from Nymex shareholders who think the price is too low.
- NASDAQ OMX Group (Nasdaq:NDAQ) This stock has lost 33% of its value year to date. The last two quarters NDAQ has disappointed to the downside with its earnings reports and investors are worried about volume numbers on the Nasdaq.
- InterContinental Exchange (NYSE:ICE) This stock has fallen 27% year to date. ICE specializes in OTC and futures trading. The stock was a huge winner until the last few months.
For the NYSE and the Nasdaq a lot of the concerns surround the lower average daily trading volume in the last few months. It seems that traders have taken a wait and see approach with the stock market, which obviously is tough on exchange profits.
As a whole the exchange group looks pretty cheap from a valuation standpoint. The PEG ratios are as follows from cheapest to most expensive:
- NDAQ- 0.76
- NYX- 0.9
- CME- 0.95
- ICE- 1.06
All of these valuations are quite attractive relative to the S&P 500 as a whole and historical PEG's for the exchanges. While there is some recessionary pressure and some merger and acquisition questions surrounding this group, the long-term picture appears quite solid. These stocks will likely do well in the long run as the value of their business shows itself more clearly.
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