TMX Group (X.TO)

The question was how will AI affect it. His answer was that AI should help it but only incrementally and not profoundly, and won't make major changes in its EPS profile. The quality is there but there is uncertainty in the capital markets. It is below its 200 day moving average so technically he wouldn't buy it.

Known as owner/operator of TSX. But through a string of acquisitions over 20 years, now a multi-segment business -- trading and clearing markets for equities, fixed income, and derivatives. Large and growing insights and analytics, with recurring revenue from fee-based subscriptions -- leading to higher margins and ROIC. 

Over last decade, 11% compound growth rate of dividends and 23% compound growth rate in total shareholder return. Pullback predicated on fears of AI disruption, but that risk is overdone. Yield is 2.04%.

The recent drop was due to fears of AI disruption. TMX's business is impossible for AI to take over. TMX has unique connections to all the various players in the market. Their listings business is doing very well given the strength in mining (gold and silver).

Tollbooth for Canadian capital markets. Valuation now more reasonable. Not cheap, but risk/reward is improving. Owns, and on her watchlist to add on further weakness. Record results reinforce conviction in the name.

Raised dividend, restarted share buybacks. Upside potential of 22% to target from here.

Results last week were very good, dividend increased. Not particularly exposed to a downturn in IPOs or equity issuance, but it's nice gravy when it does have a good quarter on those. Under pressure because one segment touches on software -- but the proprietary nature of data and strong network mean they're insulated from AI disruption.

Pullback is compelling opportunity for new investors.

Came out of the position in August, as it broke technically. Now trading around the 200-day MA. In financials, focus on where the strength is, and that's the large banks. Likes it long term as a data play. Tricky market backdrop, so be careful when you add.

Runs TSX and other trading platforms. Revenue not just from trading, but also from data analytics (42% of total revenue and growing double digits). Recent pullback (due to slowdown in new listings) hitting nice support level. Not a bad time to add. Derivatives trading delivered strong 27% growth YOY. Ranks 9/10, sees just over 25% upside from here.

Healthy balance sheet. Dividend is reliable. Yield is 1.74%.

Within the sector, all of the exchanges have been backing off over the last 3 months. He came out of this name partway through July. Below 200-day MA, and all MAs are moving lower. 70% of S&P companies have performed better over last 12 months. Laggard. Better opportunities.

We would be comfortable buying X today.
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X has fallen from $58 to $54 over the past month, but it is still up 22% year-to-date and 25% on a one-year basis. Despite the recent negative price action, we view its overall trend as still very much intact, and we think this type of consolidation is healthy. It trades at 26X forward earnings, and we are not concerned by this recent move. We would be comfortable slowly averaging in here, or adding a new position.
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Slogan for good stock candidates:  "The longer the base, the better the case." This chart had a big base for several years. Then it broke out, and look what happened. You can see this over and over again in stocks. 

Moved into an uptrend, arced off aggressively. Now pulling back from being overbought, will likely retrace to somewhere near the trendline which is probably somewhere near the 200-day MA (don't expect it to hit exactly). Not a disaster at all. On the chart from Feb-April of this year, those previous buyers may sell if it breaks that level of ~$51-52. Keep an eye on that.

He likes the sector but it is not really a small cap now so he doesn't own it. It created a lot of value with their strategies and carved out out some very unique assets. He feels the value is a bit stretched. He owns Euronet which trades in France

A wonderful performer in recent years. Not just the TSX, but they have businesses around the world like trading platforms and economic data/analytics, based on subscriptions, so lots of recurring revenues. Their results may move a little due to trading volumes and new listings, but TMX is so diversified that enjoy recurring high margins. The stock has been on a tear, and not cheap now. One of the best companies in Canada.

Fingers in a lot of stock-exchange pies. Companies pay to keep stocks listed. Fees from trading activity, which has been fast and furious. Options market has been even more frenetic. Also has sticky recurring revenue businesses, which are less cyclical. In his dividend growers mandate. Globally diversified.

Consistently does well. You might want to wait for it to pop down. Decent one to buy now and hold for 5-6 years.