But this new age of fiscal propriety has been particularly harsh on the IntercontinentalExchange (ICE), a young, brash electronic commodities market so modern it dispensed with proper grammar when spelling its name.
ICE shares have lost nearly 60% of their value this year as lawmakers threaten to increase regulation of the energy market, and ICE is a big player in energy futures. ICE also ceded market share to rival
Nymex (NMX) as oil companies hedged against a pullback using Nymex-traded options. And while second-quarter net income surged 58% amid a big jump in trading volume, the momentum appeared to have fizzled in July as the oil rally lost its sizzle.
Anxious Times: Friday's 1.7% bounce cut last week's loss in the Dow to 0.3%. Stocks perked up after the Fed's chief said that he expects inflation to moderate.
Still, has the pullback gone too far? At about 88, ICE shares fetch 13.5 times projected 2009 earnings. This, quite remarkably, is now on par with the valuation of
Nasdaq OMX Group (NDAQ), a fine exchange that has made great strides with cost cuts and expansion but whose stocks can easily trade at rival markets -- unlike "non-fungible" derivatives that can only be bought and sold at the same futures market. The stock also trades at 17.6 times 2008 profits, compared with more than 20 times for specialized finance stocks.
Sandler O'Neill analyst Richard Repetto argues that ICE faces comparable risks as other U.S. exchanges. Yet its stock has suffered bigger declines, even with better growth so far this year in transaction revenue, operating income and per-share earnings.
To be sure, ICE may never see the staggering multiples it once commanded back when growth was unfettered and booming. But a pesky hurricane season could easily goose energy trading this fall and arrest the stock slide. So could mounting geopolitical tension surrounding Russia.
Helping to put a floor under the stock is the company's recent plan to buy back $500 million worth of shares over the next 12 months, which Repetto estimates would cover more than 8% of diluted shares outstanding. His price target: $165.
