Appalaches Capital, an investment management firm, released its third-quarter 2024, investor letter. A copy of the letter can be downloaded here. Appalaches Core LO ended the quarter with a 3.0% gain after all fees and expenses compared to the S&P 500’s return of 5.9%, the equal-weighted S&P 500’s return of 9.6%, and the SOFR Index return of 1.4%. The fund has achieved a net return of 7.1%, year-to-date. During the quarter, the firm made several changes to the portfolio, with about two-thirds now allocated to risk assets, aligning better with a normalized allocation, and planning to invest idle cash as opportunities arise in companies with strong competitive positions. The firm aims to buy shares at a discount to their intrinsic value, but this has been more challenging over the past year. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Appalaches Capital highlighted stocks like CME Group Inc. (NASDAQ:CME) in the third quarter 2024 investor letter. Headquartered in Chicago, Illinois, CME Group Inc. (NASDAQ:CME) operates contract markets for the trading of futures and options on futures contracts. The one-month return of CME Group Inc. (NASDAQ:CME) was 6.06%, and its shares gained 7.65% of their value over the last 52 weeks. On November 29, 2024, CME Group Inc. (NASDAQ:CME) stock closed at $238.00 per share with a market capitalization of $85.229 billion.
Appalaches Capital stated the following regarding CME Group Inc. (NASDAQ:CME) in its Q3 2024 investor letter:
“While the rest of the world appeared worried about new competition threatening CME Group Inc. (NASDAQ:CME) and their dominant position in interest rate futures, I took the opposite view and added it to the portfolio. CME Group is best known for operating the Chicago Mercantile Exchange, which enables futures and futures-based derivatives trading worldwide. CME has an overwhelming share of the interest rates market with 99% share of U.S. treasury futures. Exchanges tend to be very high-quality businesses with natural and defensive competitive advantages. At the time of our purchase, CME traded at the 4th and 26th percentile of its 10- and 20-year historical valuation range on concerns of increasing competition.
BGC Group, headed by Howard Lutnick, is attempting to launch a new treasury futures exchange, FMX, to compete with CME. With CME having nearly all of the market share, it is easy to see why this could be enticing. As an incentive, BGC is waiving all trading fees on the platform and providing other financial incentives for large anchor trading firms. These firms include large banks, Citadel, Tower Research, and Jump. With this lineup and incentive structure, the challenge became newsworthy, and I believe that it was weighing on CME’s stock price…” (Click here to read the full text)
A businessman in the foreground shaking hands with a colleague in a trading floor.
CME Group Inc. (NASDAQ:CME) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 63 hedge fund portfolios held CME Group Inc. (NASDAQ:CME) at the end of the third quarter which was 59 in the previous quarter. CME Group Inc. (NASDAQ:CME) reported $1.6 billion in revenue in the third quarter, up 18% from the third quarter in 2023.While we acknowledge the potential of CME Group Inc. (NASDAQ:CME) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed CME Group Inc. (NASDAQ:CME) and shared Upslope Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.