Eagle mid capt steers clear of traditional banks and finance companies, which McCallister says carry too much credit risk. Yet 16% of his portfolio is in nontraditional financials such as insurance companies and exchanges. Among his favorites: CME Group (CME) and IntercontinentalExchange (ICE), which both operate global electronic-derivatives exchanges. "When something goes wrong in the world, volumes in stocks go down, and volumes on derivative exchanges go up. These companies are at 18 times earnings...But the returns on capital are sky-high."

Buy - Price 95.94 on Aug. 24
by Sandler O'Neill

[Credit-default-swap] volume again topped $100 billion, as European volume exceeded U.S. levels. Total cleared CDS volume was $141 billion for the week ending August 21, down 7.5% from $153 billion in the prior week. ICE Clear Europe cleared $83 billion in its fourth week...up from $72 billion the week before. ICE Trust U.S. cleared another $59 billion, down from $80 billion the prior week. This was the first week that European volume exceeded U.S. volume. We are not changing our 2009 and 2010 EPS estimates of $4.38 and $5.20. We're keeping our 130 price target, based on 25 times our 2010 estimate. There is no change to our Buy rating. Market cap: $7.1 billion.

CDS play

WAS GOOD

Gary Morrow: "IntercontinentalExchange (ICE) is one of the top performers on the NYSE today." Read the full article here.

Exchange transaction exposure.
Think they will gain from CDS clearing transactions

Exchange transaction exposure.
Think they will gain from CDS clearing transactions

From a recent Mad Money show:"ICE is interesting, but I've turned positive on NYSE Group (NYX) since they have the dividend to pay you to wait for a turnaround."

Neutral - Price 73 on Jan. 6
by Broadpoint.AmTech

We expect ICE will remain rangebound, at least until visibility surrounding OTC [over-the-counter] energy increases- something we will be digging for over the next few weeks. We expect 2009 consensus to fall toward $4.50, from $5.33. Given the reduced reporting transparency combined with the uncertainty surrounding volumes, we believe a 17 times multiple is appropriate (previously, we had used a 20 times multiple), making ICE's share price fairly valued in the mid/high $70s. While we still expect the launch of CDS [credit-default-swap] clearing to act as a positive catalyst, we believe it is now offset by declining OTC energy activity. We are downgrading ICE to Neutral, from Buy. Market cap: $5.2 billion.

Jon Najarian recommends several of the big name exchanges including NYSE Euronext [NYX], Chicago Merc [CME], Nasdaq [NDX] and ICE [ICE]. "I'm long all of these, because I do believe deals are going to happen", said Najarian.

Down too far to recoup

Earnings may be hurt by coming regulation and an extended economic slowdown.

wild optimism

went up to fast, now in freefall

.84

I don't hate it ... has nice growth potential ... BUT have you investors looked at this company's P/E lately???

out of my reach

Goldman Sahcs lowered its position ot 5.6%. Morgan Stanley reduced their holdings to 4.29%.