IntercontinentalExchange, Inc. (ICE)

GA based provider of market data and electronic trading. volatility to increase, making hedging and speculating attractive. the scramble for resources will take place among financial institutions and industrial users.

electronic trading of commodities rather than open out cry trading will be the future for this type of trading, and that coupled with coming commodity price volatility consequential to higher inflation plus the growth in electronic trading of CDS contracts means ICE, the leader in electronic platform trading, will benefit enormously from the inevitable significant growth in trading volume in all commodity and financial futures.

This is a long term play. probably gonna kill me on CAPS.

same as CME great growth rate

ICE CME BHP AAUK FCX ISHG ISRG IART PCLN ESRX HSIC ACOR

CPWR GMKT SNPS CPWR PDCO NUVA WCRX ORCL CDNS ERTS

AKAM PAYX ATVI NVDA AMZN MYL ESRX SOMTT UBCP WCRX

Good earnings.

Fool pick -3-11-09

I like the potential business growth for ICE in the CDS market. I think the management will work aggressively to grow the business.

POST BY RBBARN7EXCITECOM
MY BEST PICK

great control here.

Looing at 85 to 100 post earnings.

Hoping this one pulls upward.

it will soon recover from the steep drop on the 6th

ICE dropped 14% yesterday on analysts down ratings. Why didn't it drop a few days ago upon the news that propmted the down ratings? Illogical trading. This was a panic sell, again. This stock should recover in a few weeks and stabilize.

Good earnings.

New 52 week low. Double down on losing position.

Oversold, undervalued.

exchange, sept & oct bumper months

Most def! It will outperform. Yes, volatility is excrutiating & yes a blind monkey throwing a dart towards a board carried by a red ant could hit outperform based on the cesspool created this month! . For about 3 yrs. I waited anxiuosly to buy this stock. resisted the temptation when it hit the 90s! Then came Oct 2008! I watched this carefully. Here's what happened:

Twice it hit $61/-, then finally in today's paranoia, it dipped to $53/-. I was still analyzing this stock thru the day using Valueline #s. (will explain L8r). Couldn't buy @ 53 or 55, waited to see the last 30 min volatility that we're used to. Then plunked some actual $$$ in & bought it @ $59/+. Peak to trough was $62-$53.

This is actually the price that ICE started trading for the general public with it's IPO on day 1 @ the open. I did regret the decision not to buy @ that price! But after a few gut wrenching hours I bought it below $60/- today.

The first time it hit $61/- was on Fri Oct 10th. The next monday it opened @ $115/-. Imagine the volatility. Settled in the high 80s to 90s. In the subsequent selloffs, it came back to $61/- again & ballooned back up to the mid $70s! That day it's trough to peak was $61/- to $79. Wow. That'd completely thrown me off, until I looked @ Valuline #s on their report for Oct 24th.

They reduced their estimates for 2008 by 6% & 2009 by 3/+%.

2008 EPS= $4.85. (ICE Eurpoe clearing house is delayed till November). Now I said what if that was more hokie than fact that they were writing ( remember the S&P execs. & their cow analysis in front of congress)! Reduce it by 20%, I said! That'd give 2008 earnings $3.88.

Nouriel Roubini stated yesterday to expect 2009 S&P to earn $60/- giving it a 12 multiple. So, I thought multiply the reduced earnings by 12 & u get $47/- $48/-. The 2006 avg P/E was 28 & 2007 was 43.

Suppose all that was irrational exuberance! So far 2008 has ranged from 10.9 ( todays low & using Valuline full eps of $4.85) to 40 @ it's peak prior to the crash! Now that average would be skewed. So I wondered if a multiple of 15 would be justified. Since it did get down to 10 earlier, & we know that the business is in tact & as the leading ELECTRONIC exchange for futures, OTC, commodity & yes, CDS ( don't forget those jewels, which they'll be for ICE), that couldn't be a stretch. So @ $3.88*15= $58 & if valueline's #s come in close we're looking @ $73/-. Even if we average, this is still a $65/+ stock. That's for 2008.

2009 Valueline EPS is @ $6.20, reduced from $6.45. Reduce it by 20% ( for all of Wall Street's shenanigans) & I came up with $4.96. Multiply that by 12 & we get the price I paid today of $59. Multiply it by 15 & I get $75/-. If Valuelines #s come in within$6/-, we're looking @ 6*12=72 or 6*15=$90/-.

Now, the 20% reduction is based on mistrust of analysts #s! There once was a risk premium in the bond/ debt market; and since the analysts created cow dung out of them we have to create a mistrust premium. Yes, it's a guess, but even when I reduced it by that much I still came out with a valuation in the mid $70s. possibly 25 % return. Obviously, that's just fantasy! Next week it could drop down to $40/-. If so, I'll buy what little I can.

Now, Cash Flow. 2007 operating cash flow was $288 million! 2008 projected to be $420 mill ( $6.10/ per sh.). 2009 operating cash flow of $500 mill/+($7.20/ persh). So, I put my mistrust premium to work on those #s. 2008 reduced by 20%, gave me $4.88. So, I paid 12* cash flow for this year. & after a mstrst reduction for 2009, I came up with 5.76. Gave 10* 09 cash flow. If I used Valueline #s, paid 9.7* 2008 & 8.2* 2009 cash flow. Don't know if that's good or bad!

With Book value, paid 2.8* 2007/ 2.8* 2008(based on mstrt premium, otherwise, it's 2.2*2008)/ 2.4* 2009( with mstrst premium, or 1.9* valueline).

A few things about ICE. Congress wanted to blame them for Oil price speculation, so in the bright future of further Gov't regulation, expect some form of limits put on OTC/ derivatives trading. Don't know what it'll be! ICE was the reason Open Outcry was eliminated & prices were matched to real time electronically! they also made NYMEX cry! Initially, using Philip Fisher's theory of goodwill creating value, I thought NYMEX would be better than ICE. Thankfully, I never bought that stock, since it was evident what ICE was doing to the open outcry system! Finally, rumors are a whirlin' that they maybe bought by a foreign entity! Bad news here is that if prices go down the premium offered maybe below where I got in. Good news is that @ least through the next couple of years the volatility will allow the company & CEO to just say NO!

Finally, why valueline? Walter Scloss had a 22,000% gain thru his investing carrer using Valueline survey in a corner room with a writing instrument of some sort & some papyrus! Sad, isn't it. the more technology we use the worse our investing record is!

May your returns be stratospheric, hopefully not from the ocean floor up!!