Thursday, December 11, 2008
(Cont'd from above)...

Jim (cont'd):   

NYSE Euronext, Inc. (NYX) has experienced such a beat down of epic proportions that its once meager dividend now yields a juicy 4.7%... a juicy one...

The expected dividend payout for next year is $1.22 per share... and NYX should generate about $3.15 of cash flow so we be safe... That means that even, and especially, if the stock goes down, you can buy more!... at a better yield... which matters, because the stock has been a little spiky of late...

NYX is finally low enough that the dividend provides... yes, you heard it... some real safety!...

Now, it's true, that we didn't catch the bottom of this one at $16... I wish that I had gone positive that $20 instead of $26, but bottoms are sometimes like this... (sound effect of a man jumping out of a window)... very hard to call.

And this stock has been such a loser for so long that I wanted to err on the side of caution... and wait before I let it out of the Sell Block for good behavior...

So many people have tried to call a bottom in the stock and have gotten burned... but now it looks like it has truly bottomed because of the blimp like yield...

That don't you dare buy NYX all at once... You can start a position at these prices, I wouldn't put on more than 25 shares (i.e., 25%) at this level, if I wanted to build a position of 100... buying it on increments on the dividend...

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NYX, the stock, has come back from the dead, but I wouldn't be telling you to buy it if the company wasn't also not getting better... After years of losing market share... the NYSE had close to 80% share of total stock listed volume in January of 2005... it fell to nearly 40% this year... The company has started to take some of back... finally taking some share back... two straight months... reclaiming its own turf... Now it's not big, but at least it's not going down... and it did have two months of a new trend... and the company's new market model, designed to give its customers faster order executions... better price discovery, less volatility, along with a universal trading platform... a single trading platform for all the markets within all of NYSE... feels a lot like Archipelago... could help these marketshare gains continue.

The whole time that John Thain ran this company... he was in total denial about the importance of the marketshare loss... telling me repeatedly that I was wrong to worry about it... but I didn't know what I was talking about... as the stock got shredded each month, because they lost market share... It's no wonder that the stock finally has some pep. A marketshare erosion might at last be behind it...

And, with all seriousness... memo to John Thain... you were dead wrong!

It's been about 11 months since the NYSE announced its acquisition of AMEX... and the deal closed a little more than two months ago on October 1... I think the former owners of AMEX have finished selling their stock... man, they dumped it like mad... and it is at last safe... Marathon Man safe like... to start buying...

The AMEX deal is expected to save the NYSE $120 million in costs... up from an initial $100 million... good job... and cutting 35% of AMEX's 471 employees... and their target is to bring that number down to 100 employees... even though they get all these listings... by mid-2009...

This acquisition has allowed the NYSE to take an enormous share of the only growth area in the market right now... ETF listings... Of roughly 830 ETF listings in the United States, 680 will trade on the NYSE's electronic platform... that's huge. They do a huge amount of business...

Now, ETF's represent about 31% of all trading in US equities... they are used by short sellers to knock down all your stocks... and that puts NYX in a great position.

Plus, the NYSE could use its electronic platform at the AMEX to further increase its market share...

Also some good news from the EuroNext front...

The Europeans are finally letting NYX fire people... the voluntary retirement program at the NYSE is expected to save the company $20 million in 2009... $30 million in 2010, at last...

On top of that the company will be laying off 200 workers in Europe by the end of 2009. The wheels of capitalism... a foreign concept in much of Europe... are greased by the desire for wrinkle free skin and aggressive layoffs...

Plus, the London International Futures and Options Exchange (i.e. LIFFE), which the NYSE got when it merged with EuroNext, is bringing European derivatives clearing in-house... boy, that's a lot of money... you get a lot of money... that's going to generate between $75 to $100 million by 2010...

Then... this story is good... then there's the takeover talk...

There have been reports that the NYSE and Deutsche Boerse have been in merger talks... although neither company confirmed anything... it was on, then off... it was like all weekend...

The rumors have already moved the stock, but the reality, if it happens, could move it even more...

We also just ended a three month IPO drought with the Grand Canyon Education IPO... it's the second longest in history... after the six-month drought in 1974 to 1975... when we were trying to whip inflation down and the companies' fundamentals were all bad...

This time around we have tons of companies that are ready to come public, and new listings mean more money. It is inconceivable to this guy that companies will simply never come public again... but that's how the stock acts.

Right now, there is simply too much negativity surrounding NYX. I'm not saying you should buy it right here, all at once... Nobody ever lost money waiting for a pullback... I need the pullback... Still, you buy it here and you're practically getting EuroNext for free...

Let's look at the numbers...

NYX eight €8 billion... that's $10 billion... at the time. Now the two companies together have a market cap of less than $7 billion...

That's ridiculous!

Here's the bottom line...

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Jim's comments AFTER the interview:     After taking about a 42-point bruising, NYSE Euronext, Inc. (NYX) is now taking share, cutting costs and sporting a Notorious B.I.G. juicy 4.7% yield. It gives us a reason to buy it, if the stock goes lower. It's time for this company to leave the Sell Block, and return to the world of buy, buy, buy... Oh, and by the way, the CEO, Duncan Neiderauer, is a great guy... and I am glad that I can finally let him and his company out of the big house. Duncan, it was never about friends... it's always about money.

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