Stock of the Month: JPMorgan Chase (JPM)

Written by Donnie Nguyen

March 24, 2019

Intro

JPMorgan is a member of the Dow Jones Industrial Average and run by one of the best CEOs in the business – Jamie Dimon. During the Great Recession, they negotiated a deal with the government to purchase Bear Stearns and Washington Mutual for pennies on the dollar. In additoion to saving America from a Great Depression, this move also gave them a ton of power.

One area they’re starting to focus on is Silicon Valley. Goldman Sachs (GS) and Morgan Stanley (MS) have long led the majority of tech IPOs. But this may change after JPMorgan was chosen to lead this year’s planned Lyft IPO.

Business Model

JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”, NYSE: JPM), a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the United States of America (“U.S.”), with operations worldwide; JPMorgan Chase had $2.6 trillion in assets and $256.5 billion in stockholders’ equity as of December 31, 2018. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S. and globally many of the world’s most prominent corporate, institutional and government clients.

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Stats (as of 2/22/2019)

  • Market Cap: 326.6B
  • Closing Price: 99.76
  • Trailing P/E: 11.10
  • Forward Annual Dividend Yield: 3.21%

CHART ACTION

JPMorgan’s stock price looks reasonable, but I wouldn’t say it’s a steal. It’s currently just below its 40-week moving average. The MACD indicator does show some promise.

Overall, I’m not that excited about the chart. I’m basing this stock pick primarily on fundamentals.

    risks

    The primary risk I’m concerned is market cycle risk. This U.S. economy has been going strong for several years. Just Friday, the yield curve inverted (3-month Treasury rates higher than 10-year Treasury rates). Yield curve inversion has predicted the last 7 recessions. I don’t expect JPMorgan’s stock price to do well in a recession so this is something to keep in mind.

    Should I Buy?

    JPMorgan Chase could be a great addition to a portfolio that needs some exposure to:

    • The Financials sector
    • Blue Chip stocks
    • Dividend paying stocks

    Be sure to do your own research and determine for yourself if JPMorgan Chase is a good stock for your portfolio.

    How Much Should I Buy?

    Here are some portfolio guidelines we Wolves try to live by:

    • Thou shalt not hold more than 35% in any one particular sector
    • Thou shalt not invest more than 10% of principal into 1 individual stock
    • Thou shalt make small purchases. The general rule of thumb is to spend no more than 2% of your portfolio on a single purchase and build up your position over time.

    For an our updated portfolio management guidelines, click here.

    The Bottom Line

    JPMorgan Chase is a banking giant with great leadership. It pays a good dividend and is making advancements into tech IPOs. The current price looks reasonable, but not necessarily inexpensive. I think it’s a good buy for the long-run.

    DISCLOSURE

    I/we own shares of stock in JPM and GS

    Except for Wolves of Investing, I/we are not receiving any compensation from and do not have any business dealings with any companies discussed in this article.

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    Donnie Nguyen

    Donnie Nguyen

    Donnie Nguyen is the founder and CEO of Wolves of Investing. He started investing in the stock market in the early 2000s. He follows the teachings of Peter Lynch, Warren Buffett, and other investing legends. When he's not investing or blogging, he loves spending time with his family traveling and experiencing the world.

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