4. BGC Group, Inc. (NASDAQ:BGC)
Number of Hedge Fund Holders: 33
Current Market Capitalization: $4.64 billion
BGC Group, Inc. (NASDAQ:BGC) is a brokerage and financial technology provider to the commodities, energy, and worldwide financial markets. Brokerage for a variety of financial assets, such as fixed income, stocks, commodities, derivatives, and real estate, as well as software for trading platforms, clearing, transaction execution, and other back-office activities, are among its service and product offerings. Banks, financial institutions, and corporate entities make up the majority of its clientele. The brokerage services division of BGC is the only reportable section of the company. Geographically, the company’s revenue is derived from Asia, France, Other Europe/MEA, and Other Americas; the United Kingdom and the United States account for the majority of the company’s revenue.
A new exchange for trading U.S. Treasury futures and Secured Overnight Financing Rate (SOFR) futures, the FMX Futures Exchange, was successfully launched, according to a statement released by BGC Group (NASDAQ:BGC) on September 24. The FMX Futures Exchange’s innovative trading platform, which allows for quick trade execution, is intended to give customers a more effective and affordable approach to managing their interest rate risk.
After the quarterly results, Patrick Moley, an analyst at Piper Sandler, increased the firm’s price target for BGC Group from $10 to $11.50 and maintained an Overweight rating for the shares. BGC’s stock grew by over 37% year to date. The company is anticipated to benefit from the opening of the FMX Futures Exchange, as new income streams from trading fees, clearing fees, and other services would be created. Additionally, the exchange is anticipated to grow the company’s market share in the derivatives market and draw in new customers.
O’keefe Stevens Advisory stated the following regarding BGC Group, Inc. (NASDAQ:BGC) in its first quarter 2024 investor letter:
“During the quarter, BGC Group, Inc. (NASDAQ:BGC) announced several milestones and key elements of our thesis. First, the company provided its Q4 business update, stating it expects to be around the high end of its previous guidance range. Fenics (fully electronic business) revenues increased 20% y/y, led by Rates and Credit trading, which saw revenues rise 25% and 42.6% y/y, respectively. The market underestimates these segments’ normalized revenue and earnings power after a decade-long 0% interest rate environment. We believe these lines are just getting started in what is the normalization between treasury issuance and trading volumes.
In January, after many delays, BGC announced FMX Futures Exchange received CFTC approval and would soft launch in the summer. The exchange will compete directly with the CME, attacking their monopoly business. We detailed the key thesis on why we believe FMX can take a significant share from CME on X(Twitter), which can be found here.
The most impactful announcement was BGC’s inclusion in the S&P 600 Small Cap index, leading to the purchase of 46 million shares by price-agnostic buyers. A core tenet of the C-Corp conversion was the index inclusion opportunity. Management continues to execute its strategy with a healthy business environment and the imminent FMX launch. Despite the stock rising 11.5% in Q1 and nearly 50% over the past year, it remains undervalued. Normalized earnings power will show as Fenics becomes a more significant portion of revenue, with higher margins, lower capital intensity, and an improving business environment. We continue to hold the position and believe fair value is north of $10/share.”
