Wednesday, March 08, 2006

Investment on Value?

NYX (NYSE Group Inc.) and NDAQ (NASDAQ Stock Market, Inc)

Today is a big day for NYSE or New York Stock Exchange. It transformed itself from a not-for-profit exchange to a public company after about 214 years since establishing. Its stock jumped from 67 at open to 80 at close. Its market capitalization is about 12.64 billions as of today.

Meanwhile, the market capitalization of NASDAQ Stock Exchange is about 3.16 billions as of today. There are another two exchanges: Chicago Mercantile Exchange Holdings Inc. (CME) has a $14.5 billion cap and CBOT Holdings Inc. (BOT), the Chicago Board of Trade, has a $6.2 billion cap.

What can we see from those numbers?

This morning, when NYX’s price was about 70, I called a friend and told him to take action immediately. The reason I did so was simply because the following 3 points:

1. Usually, a stock would be well shinned at its IPO. It is very reasonable, perhaps more reasons, that NYX should not be the exception.
2. Each of the 1366 seat owners on NYSE has 80,717 shares of this stock. Those giant players would not let their wealthy devaluated before taking a profit.
3. The NYSE acquainted Archipelago Holdings Inc. for 10 billions. (This price for Archipelago might be little higher, but it is the “market price”). Based on the current price, we can simply find the value of NYSE = 12.6 billions – 10 billions = 2.6 billions. If CME could worth 14.5 billions and CBOT could worth 6.2 billions, don’t you think NYSE should worth 2.6 billions?

The new NYX owns exchange at both East and West coast now, and the Archipelago is the leading ECN. You probably won’t see a different soon because of the cost of merging, but you should definitely keep an eye on it to check the further development.

The NASDAQ is the second after NYSE. It seems waking up. Its price has jumped from 10 to 40 in the past 12 months. Today, its closing price is 38.56. But still, all other public exchanges own times higher market value than it. So, if NYX keeping up, what do you think of NDAQ?

I have to remind that all the tickers I mentioned above have relatively high P/E ratio. For long term investment, it is a negative sign.

Beginning from last December, I believe those exchanges have made decent moneys because of the increase of the volumes.

For short term player, there are chances, especially before the announcement of earning.

For short term only, my suggestion is

1. NDAQ: Buy
2. NYX: Buy

Wish you all good luck!

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