Shares of the London Stock Exchange Group are trading at a “very good” entry point for investors after a 10% decline in the bourse’s stock over the past month, according to a fund strategist. Hannah Gooch-Peters, global equity investment analyst at Sanlam Investments, said the U.K.’s premier stock exchange had performed well in the past year due to the volatility in the fixed-income markets and the high spot prices of commodities. The 300-year-old exchange is one of the largest venues for bond trading in Europe and has a large recurring earnings business. The LSE beat analyst forecasts after it reported a 16.2% increase in third-quarter income to £1.9 billion ($2.3 billion) and said 70% of revenues were recurring. Despite this, the company’s shares still trade at a large discount due to fears surrounding the $27 billion Refinitiv acquisition deal, according to Gooch-Peters, who’s part of the team behind the outperforming Sanlam Global High-Quality Fund. “I think that the entry point for a company that has a moat that good and barriers to entry that high is very, very good over the long term,” she told CNBC’s “Squawk Box Europe.” LSEG-GB 5Y line The share price of the London Stock Exchange Group has risen by 101% between Jan 2018 and Jan 2023. The London Stock Exchange Group, which goes by the ticker LSEG, is the fifth largest holding at 4.1% of Gooch-Peters’ $480 million fund. The stock has underperformed the FTSE 100 benchmark index, which is up by 7% in total returns over the last 12 months, and was downgraded to neutral by UBS equity analyst Mike Werner in December. This caused the stock to decline by 13%, though it has recovered some losses. Werner said he expects the stock to remain range-bound for at least another six months as investors wait for stake sales from Blackstone and Thomson Reuters, which own a third of the exchange through the Refinitiv deal. The share-sale lockup expires on Jan. 29. However, Microsoft’s recent announcement of plans to acquire a 4% stake in the company as part of a broader cloud computing deal has helped to placate some of these concerns. “While the recent deal with Microsoft mitigates the size of the share overhang … nearly 30% of LSEG shares will still be unlocked in the coming 25 months unless LSEG can find more strategic partners,” said Werner. However, the consensus price target of analysts compiled by FactSet shows a 24% upside from the current share price.
Shares of London Stock Exchange Group are under-valued, fund strategist says
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