The settlement of most of the mortgage-related issues has removed a substantial overhang for JPMorgan Chase & Co. (JPM). The stock closed at $56.86 on Dec 3, reflecting a year-to-date return of 30.0%.
Notably, continued synergies from business diversification, consistent improvement in retail banking performance, cost containment efforts and a strong capital position led to the price appreciation. Given these factors, it seems that keeping JPMorgan’s shares in your portfolio will not be a bad idea.
However, we are not so optimistic about the above positives translating into further price appreciation going forward as the company’s bottom line will be under pressure owing a stringent regulatory environment and other investigations and litigations. Hence, we discourage further addition of JPMorgan’s shares to your portfolio.
Yost Partners was up 0.8% for the first quarter, while the Yost Focused Long Funds lost 5% net. The firm's benchmark, the MSCI World Index, declined by 5.2%. The funds' returns outperformed their benchmark due to their tilt toward value, high exposures to energy and financials and a bias toward quality. In his first-quarter letter Read More
Justification of Stance
Over the past several months, JPMorgan has settled many issues that were plaguing it for a long time. The company is fully prepared to meet the clauses of several other settlements that will likely occur in the future. Further, the company is an asset for yield-seeking investors, given its steady capital deployment activities.
However, JPMorgan reported a loss in the third quarter due to higher litigation reserves. Moreover, the company’s top-line growth is expected to slacken due to pressure on net interest margin and enforcement of new banking regulations.
Additionally, over the last 60 days, the Zacks Consensus Estimate for 2013 decreased 26.1% to $4.36 per share, while the Zacks Consensus Estimate for 2014 fell 1.6% to $6.03 per share. As a result, JPMorgan now carries a Zacks Rank #3 (Hold).
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