Another choppy week in stock markets is drawing to a close, leaving investors wondering which stocks will hold up well in the coming weeks. Today we highlight a member likely to benefit from increased market volatility, the London Stock Exchange Group (LON 🙂 (OTC :).
London Stock Exchange Group describes itself as "a global financial markets infrastructure company". It is best known as the operator of the London Stock Exchange, the largest stock exchange in Europe, with a history dating back to 1698.
On October 15, LSE shares closed at 8,650p (or $ 28.91 for US stocks). So far this year, the stock is up 12%. Since the lows in early spring, stocks have bounced back by more than 63%. In other words, the increased volatility in the markets has resulted in higher trading volumes for the group.
London Stock Exchange 1-Year Chart.
By comparison, the FTSE 100 is down 23%.
Now let's take a closer look at LSE stocks.
How the interim results of H1 came about
At the end of July, LSE was announced for the six months ending June 30 (H1). Total sales were £ 1.06 billion (or $ 1.37 billion), up 4% year-over-year (year-on-year). Total income was £ 1.24 billion (or $ 1.6 billion), an 8% year-over-year increase. Profit after tax was £ 261 million ($ 337 million), down 1.5% year on year.
The group generates revenues from three main segments:
Information services (approximately 41.3% of sales, 5% up year-on-year) – mainly includes FTSE Russell, the indexing, benchmarking and analytic services, as well as market data and research services;
Post Trade (approximately 35.1% of sales, 9% more than a year ago) – includes risk management services and various clearing houses and custodians;
Capital markets (about 20.5% of sales, down 4% year-on-year) – includes the various international exchanges and markets it operates.
CEO David Schwimmer expressed satisfaction with the results and expressed confidence in the group's prospects. The board increased the interim dividend yield by 16%. As a result, the current annual yield is about 0.8%.
Other Industry Peers
Investors may be interested to know that since the onset of the pandemic-related stock market volatility, other companies have also benefited from higher levels of trade.
Among the members of the UK junior stock index, which is home to mid-capitalization companies, are IG Group (LON 🙂 (OTC 🙂 and Plus500 (LON :). Year-to-date, the shares are up about 10% and 70% respectively. On the other hand, the index is down 19%.
Stateside, we would like to bring to your attention another stock which is Intercontinental Exchange (NYSE :). The Atlanta-based group's history dates back to 2000, when it was founded as an electronic trading platform targeting the energy markets. In the past two decades, the activities have expanded significantly. For example, it owns and operates the New York Stock Exchange (NYSE), among other trading platforms, and provides clients with market data.
Intercontinental Exchange 1-Year Chart.
Like LSE, ICE management, in its results announced on July 30, emphasized the positive effect of increased trading volumes on revenues, which were 8% higher than year-on-year.
Two segments drive ICE's revenues:
Trading and Clearing (49% of revenues)
Data and mentions (51% of sales).
Readers may also be interested to note that since 2019, ICE has been offering physically settled Bitcoin monthly futures contracts, options on the futures, cash-settled monthly Bitcoin futures contract and cryptocurrency data feed. Due to the exchange's significant operations, we expect management to take the lead in offering other cryptocurrency and blockchain products in the coming years.
YTD, ICE shares are up nearly 10%. Forward P / E and P / B ratios are at 21.98 and 7.69. Potential investors may find a better margin of safety around $ 90.
Bottom Line
It's nearly impossible to know what broader markets might do in the short term. However, seasoned investors realize that there is likely to be a bull market in any sector at any time. Market participants who pay attention to macroeconomic and market trends and do due diligence on companies may find winning stocks. This year has been a difficult time for the equity markets. Still, the shares of various stock exchanges and brokerage platforms stand out.
