Intercontinental Exchange (ICE, Financial)
Intercontinental Exchange is one of the largest and most successful financial exchange operators. The company was created through a series of shrewd acquisitions under founder and CEO Jeff Sprecher. We believe Sprecher is an excellent CEO with a history of astute capital allocation and an ability to adapt to opportunities and competitive threats. Today, Intercontinental Exchange competes in three primary segments: exchanges, fixed income/data services and mortgage technology. We believe each of these businesses exhibits attractive economic characteristics and will grow earnings faster than GDP over time. Investors today are concerned about Intercontinental Exchange’s mortgage segment as rising interest rates have depressed origination volumes. We agree that segment results will be pressured in the near term, but we believe that originations will eventually revert toward historical norms. Adjusting for this cyclicality, Intercontinental Exchange trades at a discount to the S&P 500 P/E multiple. We are happy to buy this above-average business at a below-average price.
From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund fourth-quarter 2022 commentary.
