CME Group Inc.

🇺🇸NASDAQ Global Select
Back to all articles
CME Group Inc. stock analysis CME overview
Bullish +65

Is CME Group (CME) Far From an Average Business?

📈 Cooper Investors Global Equities Fund reinitiated a position in CME Group Inc. (NASDAQ: CME) for Q1 2024.

💰 The fund returned 7.4% in the first quarter, underperforming the MSCI ACWI benchmark of 9.4%.

🏢 CME Group operates as the largest derivatives exchange globally with headquarters in Chicago, Illinois.

📊 Stock price closed at $215.48 on April 22, 2024, representing a 14.75% gain over the last 52 weeks.

💵 The company has a market capitalization of $77.579 billion and carries no debt.

📉 Shares have materially underperformed over the last five years due to value latency.

🛡️ CEO Terry Duffy is noted for identifying fraud early, specifically calling out Sam Bankman-Fried.

💸 CME routinely generates over 50% returns on invested capital and offers a special dividend yield of ~4-5%.

📉 The stock currently trades at an average market multiple compared to its typical 30-60% premium valuation.

📉 Hedge fund ownership decreased slightly, with 55 portfolios holding the stock in Q4 versus 53 previously.

🚫 CME Group is not included in Cooper Investors' list of 30 most popular stocks among hedge funds.

Bullish Signals
  • Cooper Investors reinitiated a position in CME, citing its ability to welcome uncertainty and its solid track record throughout market fads.
  • The company is the largest derivatives exchange globally, providing leading liquidity pools across multiple asset classes including equities, interest rates, FX, energy, and agricultural commodities.
  • CME Group carries no debt while routinely generating over 50% returns on invested capital.
  • Management culture is described as pragmatic with a 'no-nonsense Midwest attitude,' reinforced by CFO Lynne Fitzpatrick's appointment.
  • The stock is trading at an average market multiple despite historically trading at a 30-60% premium, suggesting potential value.
  • The company is paying a special dividend implying a yield of approximately 4-5%.
  • CEO Terry Duffy demonstrated strong risk management by calling out Sam Bankman-Fried as fraud when he was lauded as a visionary genius.
Risk Factors
  • CME Group shares have materially underperformed over the last five years, indicating value latency.
  • The stock is not on Cooper Investors' list of 30 Most Popular Stocks Among Hedge Funds.
  • Hedge fund ownership decreased slightly from 53 portfolios in the previous quarter to 55 at the end of Q4.
Full Analysis
Cooper Investors Global Equities Fund highlighted CME Group Inc. (NASDAQ: CME) in its first quarter 2024 investor letter, noting the fund returned 7.4% versus a 9.4% benchmark return. The firm recently reinitiated a position in CME, describing it as a stalwart that welcomes uncertainty and possesses a pragmatic management culture rooted in Chicago. The article details CME's status as the largest derivatives exchange globally, offering liquidity pools for risk managers across equities, interest rates, FX, energy, and agricultural commodities. Cooper Investors praises CEO Terry Duffy's risk awareness, citing his public callout of Sam Bankman-Fried as a testament to the company's nose for risk during market fads. Financially, CME is trading at an average market multiple despite typically commanding a 30-60% premium, with shares up 14.75% over the last 52 weeks and a market cap of $77.579 billion. The company carries no debt, generates over 50% returns on invested capital, and is paying a special dividend implying a yield of approximately 4-5%, presenting avenues for earnings growth irrespective of volatility. Despite the positive outlook from Cooper Investors, CME Group was not included in their list of 30 most popular stocks among hedge funds. At the end of Q4, it was held by 55 hedge fund portfolios compared to 53 in the previous quarter, indicating a slight decrease in institutional ownership interest relative to the firm's bullish thesis.