As market uncertainty continues — and the chaos escalates — I’m going to talk about a company whose stock should benefit from uncertainty and powerful long-term storylines. It’s CBOE Global Markets Inc. (CBOE), explains Bill Patalon, chief stock picker at Stock Picker’s Corner.
CBOE is an operator of financial exchanges, one of which is the Chicago Board Options Exchange. It provides data analytics, trading tools, and the technology for trading options, futures, and other financial products. And it’s one of the largest clearinghouses for options trading.
We’ve been saying for months that as uncertainty climbs, trading would, too. Especially options trading. And that’s exactly what’s happened.
Even better: The long-term outlook is equally intriguing. A kind of “DraftKings Betting Mentality” has infected the retail-investing market. So, if a gambling mindset has spread in the financial markets, why not own a piece of the action? CBOE is the “casino.”
Through the fees it collects, it effectively takes a slice of every wager. And if trading keeps growing, those fees will grow, too. Over the next five years, the securities-exchanges market — so companies like Intercontinental Exchange Inc. (ICE), Nasdaq Inc. (NDAQ), CME Group Inc. (CME), and CBOE — are projected to grow at a compound-annual growth rate (CAGR) of 12.1%, reaching $49.6 billion, says researcher Technavio.
During that same period, CBOE’s earnings CAGR is a projected 13.4%. At that rate, CBOE’s earnings would double in about 5.4 years. Since stock prices tend to follow earnings, CBOE could be a double-your-money stock play in a fairly short time frame.
Recommended Action: Buy CBOE.
