Black Knight being the latest example, which I think they paid 13 billion for. And so the idea is, can we put all of this technology together and create essentially a one data chain for the entire mortgage process from origination to servicing to all other parts of the mortgage process effectively. Making it like a financial instrument. Which is a really interesting strategy that is interesting. All right, so let's get to the second thing here. Finance increasingly moving on exchange, what talk to us about what you mean by that?

YURI KHODJAMIRIAN: Yeah. So if you think about how the world looked maybe 30 or 40 years ago, a lot of financial transactions were happening on paper, over the phone. And what's happening is a lot of this was quite risky and we saw with the financial crisis and all of these things. We need to centralize where these transactions are happening. We need to clear them. We need to create risk parameters around them. And exchanges are a perfect place for that. And so what you see is more and more financial transactions are being moved onto exchange. I mean, even the rise of Bitcoin and cryptocurrencies.

It's very similar thing. Can we centralize it? Can we really get more and more information out of these trades. Which helps regulators, helps users decreases costs, decreases friction and creates data businesses for these companies.

JULIE HYMAN: And for people who don't know, ice owns the New York Stock Exchange but it also owns a number of other exchanges and not just stock exchanges. For other types of financial instruments to your point.

YURI KHODJAMIRIAN: Yeah. So they're big in interest rate derivatives and they're big in energy. They own the Brent complex. So everything that's traded in terms of Brent and oil. So they have huge commodity businesses. They're also really big in carbon. So they're running the carbon emissions, markets in Europe and also in the United States. And it's really one of their biggest and core franchises. There's also trading of fixed income and other areas as well.

JULIE HYMAN: And then finally, as well, it's a founder led business. Jeffrey Sprecher is the guy who started it leads the business still.

YURI KHODJAMIRIAN: Yeah. I mean, it's a fascinating history of how he set up this business. And really, it was a brilliant idea and insight. And he's still leading the business today. That's quite rare in some of these large financial businesses. MSCI is another example of that where you have--

JULIE HYMAN: An active brokers as well.

YURI KHODJAMIRIAN: Yeah, exactly. And so you have founders in some of these financial businesses and they're really still driven and building this. And that's why he's prepared to take this risk. What he's doing in the mortgage market. So do something different to create a lot of value for shareholders, which he's done in the past already.

JULIE HYMAN: So when we talk about these, we always like to mention what the downside risk could be. And in this case, post leverage as you said they've made a lot of acquisitions.

YURI KHODJAMIRIAN: Yeah. So the Black Knight was the latest acquisition. The balance sheet is a bit more levered than the classic exchange. These are cash machines though, so over time they'll surely deliver and maybe start buybacks or other ways of returning money to shareholders. They need to invest in these businesses as well because it's a difficult transition technology wise. But over time that's what we think will happen. But leverage is always a bit of a risk. Things can go wrong. And so you have to watch that as an equity investor.

JULIE HYMAN: And just quickly, do you have a position in ice?

YURI KHODJAMIRIAN: We do. Yes. So we own ice in our fund which is focused on monopolistic businesses. And this is a perfect monopoly. It's all about network effects. The more people trade on each side, liquidity begets more liquidity and creates strength for ice as a business.

JULIE HYMAN: Got you. Interesting. So let's get to the stock that you do not like and that is the owner of the Hong Kong. Exchange and no shares have fallen quite a bit over the past year or so. So let's get to why you don't like it. First of all, you're looking at the valuation. And I believe you're valuing it enterprise value to EBITDA if I'm not mistaken?

YURI KHODJAMIRIAN: Actually to EBIT is the way probably we look at that. But I think the key thing is the enterprise value, which often is miscalculated. If you look at services like Bloomberg, actually the way they put EV onto the screen is not as good as if you do it yourself. And if you do that, you find that ice actually despite the fall in the share price is quite-- sorry, Hong Kong Stock Exchange, despite the fall in share price is actually quite an expensive share. And this is really strange given the growth profile of the business.

JULIE HYMAN: Interesting. OK. So let's get to our next point, which is, you think the growth that they have had is hard to sustain?

YURI KHODJAMIRIAN: Yeah. Look, I think there's no secret here. That effectively what's happening is mainland Chinese investors are preferring the a-share market in mainland China. And foreign investors are actually shunning shares. I mean, we see one of the most successful ETF stories is the emerging markets ex China ETF. And I think there's a bit of a move away for by foreign investors from Chinese capital markets. And really the people that feel the biggest brunt are the exchanges like the Hong Kong Stock Exchange.

And that network effect that I was talking about, it's really powerful on the way up. But it's also really powerful on the way down. It can really tear a monopoly apart and that's why we think that the growth can't be sustained of this business.

JULIE HYMAN: And similarly here, losing market share because when we tend to talk about the Hong Kong Stock Exchange here in the US. And our coverage is when a company is deciding where to list, for example. And they're making the choice of someplace like Hong Kong or London or the US. And so they're losing share that way, I assume in terms of also trading share.

YURI KHODJAMIRIAN: Yeah. So look, you probably remember a couple of years ago. It was really popular for European businesses to list. So we're talking about Prada, Samsonite, Loss Titan and now you read the rhetoric from these companies and they're all saying actually we'd rather delist from Hong Kong. The theory before was these are consumer businesses, the biggest consumer markets in the world are growing ones are in Asia. We should be closer to listed there. But actually what they found is their share prices are trading at big discount to their peers in Europe and especially to the ones in the United States. This is really bad. We've seen this with the London Stock Exchange.

It's really a game of where you can get the best valuation as a company. And I'm not sure if you're in a boardroom deciding where you're going to list the Hong Kong Stock Exchange is going to be the place you're going to pick.

JULIE HYMAN: Interesting. Well, just as we talked about what could go wrong for ice, let's talk about what could go right for this and that's a cut in the stamp duty. Again, not something we talk about that often here.

YURI KHODJAMIRIAN: Yeah. Look, so exchanges their lifeblood is trading. So there's more trading that happens, the more money they make effectively. And there's a ways of incentivizing trading and one of them is stamp duty. In lots of countries around the world, you pay a bit of a tax to the government for trading shares or trading financial instruments. And what's happening in Hong Kong is there's going to be a cut in that stamp duty which might incentivize trading by brokers. But also by local residents. Look this is quite well telegraphed it's definitely a risk. It could drive trading up and improve some of the numbers. But beyond that it's hard to see what growth happens in this stock and this company.

JULIE HYMAN: And just quickly what if there was also more of a rebound in the Chinese economy and Chinese stocks came more back into Vogue, would Hong Kong exchange also get some of the halo effect of that?

YURI KHODJAMIRIAN: Yeah, absolutely. That is definitely another risk. So as you can see the share price has been under pressure, it's hard to see how that happens necessarily in the financial markets. I think it will happen in consumer markets and other areas like real estate. But yeah, you could see a sentiment led bounce in the stock. And that probably would be a great time to load up a short if you will.

JULIE HYMAN: And do you have any position in this one.

YURI KHODJAMIRIAN: We don't know.

JULIE HYMAN: OK. So let's summarize what you're telling investors here by intercontinental exchange also known as ice, as it tries to do something different, entering the mortgage market, expanding there. And also finance increasingly moving into exchanges. On the other side, stay away from Hong Kong Stock Exchange. Highly valued might have a hard time sustaining that growth and it's also losing market share in listings. Thanks so much Yuri. Really appreciate you being here.

YURI KHODJAMIRIAN: It's my pleasure. Thank you very much.

JULIE HYMAN: And Thank you for watching Good Buy or Goodbye. We'll be bringing you new episodes three times a week at 3:30 PM Eastern.