Intercontinental Exchange Inc

Intercontinental Exchange (ICE) operates leading financial exchanges and clearing houses, as well as provides data and software to its customers. Founder and CEO Jeff Sprecher has long characterized ICE’s overarching strategy as 'bringing transparency, efficiency, and standardization to markets with a mission to digitize the analog'. We believe ICE should continue to grow revenue and profits at an attractive clip over time and could even see the rate improve if AI trading strategies proliferate, ICE expands into new markets, and the mortgage market picks up after a multiyear slumber. ICE is currently priced at a decade low valuation as investors are concerned about the potential impact of artificial intelligence technologies. We believe this sentiment is misplaced, as ICE’s exchanges could actually benefit from AI trading strategies, and its data and software are regulatory-compliant, largely proprietary, and deeply embedded in customer workflows.

Intercontinental Exchange (ICE) operates leading financial exchanges and clearing houses, as well as provides data and software to its customers. Founder and CEO Jeff Sprecher has long characterized ICE’s overarching strategy as 'bringing transparency, efficiency, and standardization to markets with a mission to digitize the analog'. We believe ICE should continue to grow revenue and profits at an attractive clip over time and could even see the rate improve if AI trading strategies proliferate, ICE expands into new markets, and the mortgage market picks up after a multiyear slumber. ICE is currently priced at a decade low valuation as investors are concerned about the potential impact of artificial intelligence technologies. We believe this sentiment is misplaced, as ICE’s exchanges could actually benefit from AI trading strategies, and its data and software are regulatory-compliant, largely proprietary, and deeply embedded in customer workflows.

We recently established an investment in Intercontinental Exchange, a business we have followed for nearly a decade. ICE is a leading global exchange operator with a highly moated Exchanges segment generating nearly 70% of earnings, anchored by a crown-jewel energy franchise with revenues more than two-and-a-half times those of its next-largest competitor. Over the last five years, Exchanges grew revenue 8% and profits 10% annually, with margins expanding to 75%. Despite exceptional earnings growth, ICE shares fell 21% in the year before our purchase, driven by concerns over AI's impact and competition. We believe these concerns will not impair ICE’s earnings power or intrinsic value.

Intercontinental Exchange (ICE) has shown strong financial performance, with first quarter revenues significantly higher than in 2025, and an operating margin that has also improved. The relationship between rising revenue and expanding operating margins is evident in the full-year 2025 results, which reflect a 6% revenue expansion and a 33% after-tax net profit margin, leading to a double-digit per-share earnings growth rate. This low incremental cost for rising transaction volume indicates a robust business model, with a 14% increase in per-share earnings matching the 20-year annualized increase of 15%. Overall, ICE appears to be a strong and growing business.

Intercontinental Exchange demonstrated strong performance with a return of +23.9%, contributing positively to the Fund's overall results. This outperformance reflects the resilience and growth potential within the financial services sector, particularly in the context of ongoing market dynamics. The Fund's strategy continues to benefit from such high-performing stocks, indicating confidence in the company's future prospects and its ability to generate returns amidst market fluctuations.

Intercontinental Exchange demonstrated strong performance with a return of +23.9%, contributing positively to the Fund's overall results. This outperformance highlights the resilience and growth potential within the financial services sector, particularly in the context of ongoing market dynamics. The Fund's strategy continues to benefit from such high-performing stocks, reinforcing the belief in the company's robust fundamentals and its ability to generate significant returns.

Intercontinental Exchange (ICE) faced challenges due to broad concerns about AI disruption affecting parts of its business, alongside a decline in exchange energy volumes as geopolitical tensions eased. The approval of perpetual futures for bitcoins and potential additional asset classes may not be sufficient to offset these headwinds. The combination of these factors has led us to reassess our position in ICE, resulting in a decision to reduce our exposure.

Intercontinental Exchange Inc. (ICE) operates wide moat commodity exchanges, mainly futures and options for energy, as well as a mortgage technology business. Although trading volumes slowed in several areas, particularly energy, we focus on the long-term structural aspects of the energy market that favor sustained commodity volatility, supporting long-term volume growth. We believe ICE maintains a defendable, industry-leading position across multiple business lines with the potential for favorable long-term trends.

Intercontinental Exchange has faced challenges as the market questions the necessity of expensive data in the age of artificial intelligence. The company, like several other stock exchanges, experienced a decline in September, reflecting concerns about its revenue model. The manager notes that 'most of the large global stock exchanges do not make their money with share trading but with the sale of data,' raising doubts about the sustainability of this model moving forward.

Intercontinental Exchange was mentioned as a company that detracted from the Fund’s returns for the quarter. However, it is noted that it has strongly positively contributed to the Fund’s returns over time since its inception. The letter states that while Intercontinental Exchange faces pockets of cyclical weakness, it is well-managed, performing solidly, and remains a holding of the Fund.