Natural monopolies 2026: TSM, CME, ICE, SPGI explained
2026-06-22 · By Lubin Danilo, founder of Lubin Investment
TSM, CME, ICE and SPGI all reach the maximum score in our screener because they share one rare feature: a natural, structural and nearly irreplicable monopoly. Whether it is TSMC's technological monopoly on advanced chips, the captive liquidity of CME and ICE, or the institutional reputation of S&P Global, these companies generate recurring free cash flow without having to fight for their survival.
- TSM (TSMC): maximum score, valued at 2.2× FCF. Manufactures 85% of the world's advanced chips (3nm, 5nm). No rival capable of replicating this process in the next ten years.
- CME Group: maximum score, valued at 22× FCF. Global leader in interest rate and commodity derivatives. Liquidity attracts liquidity.
- ICE (Intercontinental Exchange): maximum score, valued at 18.1× FCF. Operates NYSE, energy markets and bond clearing.
- SPGI (S&P Global): maximum score, valued at 23.6× FCF. Sovereign and corporate ratings, S&P 500 index, Platts energy data.
- Shared structural feature: recurring revenues, modest maintenance capex, pricing power and growth without dilution.
What is a natural monopoly for an investor?
For a stock investor, a natural monopoly is any company whose competitive position is protected by barriers so solid that it is economically irrational for a competitor to try to breach them. These barriers take four main forms: network effects, industrial secrets and the experience curve, extreme switching costs, and institutional regulation.
TSMC: the technological monopoly no one can replicate
TSMC manufactures 85% of the world's advanced chips at 3nm and 5nm nodes. Apple, Nvidia, AMD, Qualcomm: all depend on its production lines. No customer can leave, because there is no equivalent capacity anywhere else. TSMC's monopoly rests on three simultaneous pillars: mastery of extreme ultraviolet lithography, decades of accumulated operational know-how, and the prohibitive cost of building a competing fab (between $15 and $30 billion per factory, still trailing TSMC by two to three years). The valuation at 2.2× FCF reflects the Taiwan-China geopolitical risk. For a full analysis, see our <a href='/blog/taiwan-semiconductor-tsm-analyse-fondamentale'>Taiwan Semiconductor fundamental analysis</a>.
CME Group and ICE: the liquidity monopoly
Derivatives exchanges operate through the two-sided network effect: buyers go where sellers are, and vice versa. The venue concentrating the most transactions mechanically attracts even more. No competitor can create this virtuous circle from scratch, regardless of capital. CME Group leads globally in interest rate and commodity derivatives. ICE operates the NYSE, energy markets, and bond clearing — activities made particularly defensible by post-2008 regulations requiring approved central counterparties.
S&P Global: the institutional reputation monopoly
When a company wants to issue bonds on international markets, the regulations of many countries require a rating from one of the three recognized major agencies: S&P, Moody's or Fitch. This is not an investor preference — it is a legal requirement in dozens of jurisdictions. Beyond ratings, SPGI owns the S&P 500 index and Platts energy data: three distinct monopolies under one roof.
Comparison table
| Company | Type of monopoly | Est. FCF margin | FCF valuation | Score |
|---|---|---|---|---|
| TSM (TSMC) | Technological monopoly (EUV 3nm) | ~45% | 2.2× | Maximum |
| CME Group | Liquidity monopoly (derivatives) | ~55% | 22× | Maximum |
| ICE (Intercontinental Exchange) | Infrastructure monopoly (NYSE, clearing) | ~35% | 18.1× | Maximum |
| SPGI (S&P Global) | Institutional reputation monopoly | ~40% | 23.6× | Maximum |
Why natural monopolies dominate our screener
A natural monopoly generates recurring revenues because its customers cannot leave. It posts high margins because it does not have to win customers against aggressive competitors. Its maintenance capex is modest. It can grow without diluting shareholders. And it raises prices without losing customers. Each of these features corresponds exactly to one of our scoring criteria.
What this means for your investment approach
Identifying a natural monopoly is only the first step. The second is assessing whether the current valuation adequately compensates for residual risks. TSMC perfectly illustrates this tension: perfect quality, real geopolitical risk. The valuation at 2.2× FCF is not a free gift — it is the counterpart to a risk the market has correctly identified.
FAQ
Why are these companies called natural monopolies?
Because their dominant position stems from the very structure of their business, not from an aggressive strategy of eliminating competitors. TSMC is alone because no one can build the same expertise in a few years. CME attracts all the liquidity because liquidity generates liquidity. These barriers are natural, structural and nearly irreversible.
TSMC is valued much lower than the others. Is it really comparable?
Yes, in terms of fundamental quality. The valuation at 2.2× FCF reflects a geopolitical discount specific to the Taiwan-China risk, not a qualitative inferiority. On our ten quality criteria, TSMC validates them all just as CME, ICE or SPGI do.
Could a competitor really challenge CME or ICE?
Theoretically possible but economically very difficult. To compete with CME on rate derivatives, you would need to create liquidity from scratch. This circle has never been broken in the history of organized financial markets.
Does the maximum score mean you should buy all four companies?
No. The score measures fundamental quality, not a buying opportunity at any given moment. This article is informational and educational, not investment advice.
How can S&P Global have a monopoly if Moody's and Fitch also exist?
It is a regulatory oligopoly, not a strict monopoly. S&P, Moody's and Fitch share a market locked to three players. No fourth entrant can obtain the same global institutional recognition without decades of effort.
Analyser une action sur Lubin Investment
About the author
Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I have analyzed stocks through their fundamentals for several years and invest my own money with this method. I codified it into a tool that judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).