Saturday, February 27, 2010

Why play at the card table, when you can own the House?

Dow Jones 10,325.26 (Down) Week ending 02-26-2010

Well, are you tired of buying and selling stocks and not having the mathematical advantage? It is sort of like being a player at the casino Blackjack card table. Well, why not own the "house" instead and to quote gamblers parlance,"work off the juice". You can do this by purchasing the stock of the stock exchange,
NYSE Euronext (Symbol NYX , $26.38).
This stock has a 4.55% dividend yield so you get paid why you wait for the exchange volume to increase. The PE on the stock is a reasonable PE 11.42. The 12 month total return on the stock of 63.4%. Earnings for 2010 are projected at 2.31 per share and $2.61 per share for 2011. Not too shabby for a $26.00 dollar stock.

If you wanted to look at a second option for owning the "house" you can also look at IntercontinentalExchange Inc. (with the cool symbol , ICE , $107.29) This fast growing exchange has a five year revenue growth rate of 60%. They operate at 31.8 % Net margin numbers. The stock has estimated earnings of $5.34 per share for 2010 and $6.16 per share for 2011.

I also want to note at this point to the amateur investor, that the stocks I have mentioned in the last two weeks blogs at $100 and $200 a share actually may be much less expensive, based on value, than stocks that trade for $1 or $5 per share. Those low price stocks may be highly leveraged with many more shares outstanding, which dilutes the earnings of each share.

There are other "houses" of note certainly, among them the well known CME Group Inc. Cl A (Symbol CME) and Goldman Sachs (Symbol GS). One other one that I like and own in this group, which I feel is a good value, is Morgan Stanley (Symbol MS, $28.18). The PE on the stock is only 9. Solid earnings of $3.11 in 2010 and $3.54 in 2011. There is a vacuum now in the investment industry with Lehman Bros. and Bear Stearns being gone, so all these "houses" should become stronger.

So deal yourself a winning hand and add one of these to your diversified portfolio.



1 comment:

  1. Good advice on this one Freewilly . . . deal me in.