- High margins and return business with secular drivers. NYX's valuation does not fully reflect strength or persistence of growth. NYSE's recent merger with Euronext will enable it to benefit from Cost synergies arising from consolidating platforms and pools of liquidity, giving members of the exchange access to worldwide markets and equities.
- A combined NYX will add new products and distribution capabilities, alongside reducing dependence on human capital. NYX recently will be firing about 1/3rd of it's workforce and here's where the Archipelago merger helps NYX be more electronically efficient similar to Nasdaq.
- Furthermore, my conviction level has increased after noticing Third Point, run by the activist Dan Loeb, has taken a position in NYX. I would also like to go one step further and speculate that Atticus Capital, run by the superstar Tim Barakett, will or has taken position in NYX.
- Why? Atticus has a position in Deutsche Borse (Mr. Barakett has been pushing DB management to make better decisions- WSJ article) and had one in Archipelago before NYX bought it out. Hence, given the NYX discount, I believe Atticus will find value if shares remain at this level or drop further, as the secular bull market in world wide exchange stocks seems no signs of ending.
As you can see in June and September 2006 NYX completed its double bottom, coincidentally this occurred on its 50-day MA. It is evident from the chart that institutional funds came in and bought the stock.
Similar to 06, we're seeing this double bottom form right now in NYX.
Is the selling done? I think so. Below is a weekly chart which shows NYX has closed in red every week since April. Why? a) due to it's stock run up, b) because of news that top 8 brokerages will be forming an alliance to bypass London Stock Exchange's fees, hence the market feared this will happen with NYX too, considering it has raised prices recently, c) innovations like GSTruE (GS Tradable Unregistered Equity OTC Market) and d) downgrades by Goldman Sachs, Banc of America and JP Morgan.
In the chart below is a pattern I like to call 1-2-3, which shows a bullish picture. Also, notice over the past two weeks selling pressure in NYX has declined.
Conclusion
Considering the positive fundamental and technical picture, I'd like to recommend this stock as a buy.
5 comments:
Atticus is already one of the largest NYX shareholders. They held a significant NYX position in 2006, then sold it off in an arbitrage play and bought 12M shares of ENXT, which was ultimately converted to NYX again through the merger.
Anon-
tx for the tip. I actually looked up stock pickr before writing about it- unfortunately they didn't have them listed, errh.
tx again
Yaser,
I owned NYX earlier this year but bailed as the trade wasn't working from my entry. Now would be a good time for the stock to hold support as I have interest in these exchange stocks - specifically NMX (I hold long term options that currently show a slight loss).
The risk-to-reward setup in NYX is better now than it was when i entered. I will have to study this tonight to see if I can gather a trade.
third point has been selling not buying.
Anon-
It's possible. However, have to wait and see their latest 13F to find out where they stand.
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