Ricardo Pillai
3 min read
In This Article:
We came across a bullish thesis on CME Group Inc. on Special Situation Investing’s Substack by Six Bravo. In this article, we will summarize the bulls’ thesis on CME. CME Group Inc.'s share was trading at $273.99 as of June 20th. CME’s trailing and forward P/E ratios were 27.56 and 24.88, respectively, according to Yahoo Finance.
A view of a financial exchange, showcasing the trading activities of the company's futures and options contracts.
CME Group (CME) represents the gold standard among U.S.-based derivatives exchanges, boasting a capital-light, high-margin business model and a remarkable track record of long-term shareholder returns. As an exchange, CME occupies a unique and advantageous niche similar to brokers, royalty companies, and consumer monopolies—businesses that generate revenue from activity rather than market direction, enabling consistent profitability regardless of economic cycles.
Unlike many businesses susceptible to competitive pressures, CME benefits from oligopolistic market structures and high barriers to entry, with scalable infrastructure that supports vast trading volumes without significant additional costs. The ability to cross-sell trading data as market research and to create proprietary products, like weather and cryptocurrency derivatives, distinguishes CME from stock exchanges dependent on third-party listings. Its innovation engine enables it to monetize demand signals independently, creating instruments tailored for clients' risk-management needs, as seen with volumetric hedging tools for utilities.
CME's historical dominance is underpinned by a legacy of product launches dating back to the 1800s, and its stock has dramatically outperformed the S&P 500 since its 2002 IPO, delivering a 20% CAGR. While U.S. exchanges have outpaced their international peers, speculation about the Cantillon Effect and co-location with the world’s reserve currency adds a layer of intrigue around future performance amid de-dollarization.
Yet, CME’s real advantage lies in its flexibility and innovation, not external conditions. The firm’s ability to consistently identify and capitalize on untapped markets, like crypto futures, suggests it will continue to grow in ways investors cannot yet predict. CME is a quintessential “fish-in-a-barrel” investment in a concentrated, quality-focused portfolio.
Previously, we covered a bullish thesis on CME Group Inc. by Magnus Ofstad in January 2025, which highlighted its leadership in derivatives and strong cash flows. The stock has appreciated by approximately 15.6% as trading volumes surged. The thesis still stands given CME’s resilient model. Six Bravo shares a similar view but emphasizes its capital-light structure and innovation-driven growth.
