Zak Mir’s Top Pick for February - ICAP
This view came in the aftermath of the 12% stake sale of ICAP’s Traiana trading platforms business, boosting the group’s cash position by $300m. Traiana provides global banks, dealers, buy side firms and trading platforms with services to automate post-trade processing and risk management of financial transactions in listed and over-the-counter trading markets. The banks that invested in Traiana are BofA Merrill Lynch, Barclays, Citi, Deutsche Bank, JP Morgan, Nomura, and the Royal Bank of Scotland.
Fundamental Argument
Not only domestically in terms of the London Olympics and the Diamond Jubilee, but also a great reason for traders / investors not to get involved in the financial markets as well as waiting to see who would win the U.S. Presidential Election. In fact, as soon as the result was announced on November 6th, volatility increased with the fiscal cliff twists & turns, and then we were off on a squeeze higher both for equities and the currencies — especially the Euro. One would have thought that with the perspective of 36 years in the financial markets and over 25 years at ICAP, Spencer would have got this right and not scared off shareholders.
Despite, or perhaps because of, being a former Treasurer of the Conservative Party, it would appear that CEO Michael Spencer himself was caught “short” in terms of making a correct appraisal of the prospects for the company he founded with his November statement. Given that the financial services group is very much dependent on market trend and sentiment, he managed himself to get blindsided by the mid November / fiscal cliff issue that was blighting the market at that time and ignoring the likelihood that the worst would never happen.
The situation now as we approach February is that the financial markets have flipped into “risk on” mode which is great for the dealing world. The likelihood is that even after the considerable rebound for ICAP shares that we have seen, they are, to my mind, very much in the value zone with a p/e under 10 and dividend yield at 5% plus. These valuation underpinnings coupled with the large net cash balance are attractive and there is the added bonus of a potential continued squeeze to the upside in the stock after the CEO’s inadvertent bull shakeout in November.
It also seems strange to me that Mr Spencer did not take on board the one off negative factors specific to the middle of 2012.
February 2013
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