Seth Klarman is a billionaire value investor who has run Baupost Group since 1982 and wrote the famous book Margin of Safety.
Baupost’s 13F filings for the second quarter show the fund opened three new positions. The largest is CME Group Inc. (NASDAQ:CME), where Klarman bought 619,000 shares worth about $136.69 million, giving the exchange operator 2.52% of Baupost’s 13F portfolio.
The fund also picked up 1,274,356 shares of Axalta Coating Systems Ltd. (NYSE:AXTA) worth roughly $43.61 million, or 0.81% of the portfolio, and 392,000 shares of Pagaya Technologies Ltd. (NASDAQ:PGY) worth about $12.88 million, or 0.24%.
In this article, we are going to analyze CME Group Inc..
CME Group operates financial exchanges. It provides marketplaces where banks, asset managers, hedge funds, companies, and individual traders buy and sell futures and options contracts to manage or take risks.
In August, Jim Cramer was asked about his views on CME. He made some important comments you should not miss.
CME’s revenue rose about 1% year over year in the second quarter of 2026, while adjusted earnings per share also rose 1%. The modest growth reflected a difficult comparison with an exceptionally strong second quarter a year earlier.
Underlying trading activity remained healthy. CME open interest rose 8% year over year to 127 million contracts in the quarter. Open interest is the number of futures and options contracts that remain open rather than being closed, settled, or allowed to expire. Rising open interest generally suggests more customers are establishing positions rather than simply entering and exiting trades within the same day.
US Treasuries Could Be a Major Growth Opportunity
Bulls say US Treasuries represent one of CME’s largest growth opportunities because the market is enormous and CME is trying to link multiple parts of the fixed-income trading system.
CME plans to launch Treasury Link, which is intended to connect cash Treasury and futures trading more directly.
This could allow customers to manage positions in cash Treasuries, futures, repos, and swaps more efficiently.
The Main Competitive Risk: Perpetual Futures
A key risk is the spread of perpetual futures, also called perps.
Unlike traditional CME futures, perpetual futures do not expire on a fixed date. This matters because CME’s business depends heavily on liquidity. A contract becomes more useful when many buyers and sellers trade it. If rival platforms build deep liquidity in perpetual contracts, some retail and speculative trading volume could move away from CME’s traditional futures products.
Valuation
CME trades at a forward non-GAAP price-to-earnings ratio of 22.42x, nearly double the sector median of 11.30x. Its trailing non-GAAP P/E is 23.28x, also about 98% above the sector median of 11.74x.
CME’s forward non-GAAP PEG ratio stands at 3.28x, compared with a sector median of 1.07x. This suggests investors are paying a relatively high price for its expected earnings growth.
The stock is trading slightly below its own five-year average valuation multiples. Its forward non-GAAP P/E of 22.42x is about 7% below its five-year average of 24.18x.
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