JP Morgan Chase & Co (JPM)

(Market Call Minute.) J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? He likes both, but in the near term, Wells Fargo has some issues, so he would go with this one.

(A Top Pick Jan 28/16. Up 46.02%.) Even though the stock has had a good move recently, people don’t necessarily appreciate that these banks have been under such a difficult operating environment for so many years. This is still reasonably cheap, and could look even cheaper if the earnings go up a lot.

Theoretically, this is just getting started, but you have to watch out for the mean reversion. It has had a phenomenal run to the upside since the Trump Bump, and has been stretched significantly by the 20 and 50 day moving averages. The 20 day is at about $74 and the 50 day is at about $70. If you get a retracement back to those levels, those have the more positive risk/rewards. Seasonally, financials such as this, tend to do well from about November all the way through to April. Technically this bounced higher from its 50-day moving average. There is support between about $70 and $71.

One of the biggest banks in the world. 75% of their revenue comes from the US, very domestic focused. They are the largest bank asset manager. Have a very significant capital markets business. 2^nd only to Wells Fargo (WFC-N) in consumer lending. They’ve been gaining market share in every one of their businesses. Very good revenue growth, the only bank with a 10% return on equity, and this is in the face of significant regulations. Technically it made the 1^st new all-time high this week since 1999, a very significant technical break out, and it will probably rally for years. Dividend yield of 2.45%. (Analysts’ price target is $77.38.)

This group benefits from rising interest rates, and this is the strong man in the group. 75% of their revenues comes out of the US, so it is really focused on the domestic economy. They have a good commercial banking business, a good private banking business, and a great capital markets business. Have grown their dividend 18% a year over the last 5 years. They are taking market share from their competitors. Exceedingly well run by Jamie Diamond and his group. They don’t pay a high percentage of their earnings out. ROE is north of 10%. Price, relative to the group, has been steadily improving. Dividend yield of 2.86%.

He would characterize this as being the senior representative of the US banking sector. It is the healthiest and has the best reputation. If you want to have a position in the US financials, this is certainly a good choice. On the other hand, if you are looking for some valuation recovery, he would look at Citigroup (C-N), Bank of America (BAC-N) or Wells Fargo (WFC-N).

(Market Call Minute.) If this is one of the banks that you feel you want to own, he wouldn’t have any argument with that.

(A Top Pick June 10/15. Down 2.03%.) There is a nice little uptrend going on. We are really not going to know the answer until it gets above the $60 mark. This will be very sensitive by what is discussed by the Fed in June.

(A Top Pick July 16/15. Down 3.76%.) Still likes this and still thinks the US economy is recovering. It will be fine.

(A Top Pick April 15/15. Down 2.67%.) Had felt that we would be a few steps into some interest rate hikes. He is happy to own this. It is a great franchise.

As it is becoming clearer that equity markets are more sustainable, he is interested in having a little bit more capital market exposure. Because of this, he recently sold Wells Fargo (WFC-N) and added this.

(Market Call Minute) The only American bank that is working. Model price is 61.79, flat.

US banking has fallen by 30% this year, and he thinks that is inappropriate. Trading at 1X BV. Historically this is incredibly cheap. Dividend yield of 3%.

Financials in the US are very out of favour. 3.5% dividend and it trades below book value. Hold it for the long term.

Jaime Diamond has done a spectacular job of negotiating and navigating the company through a lot of litigation. They over-reserved for it, so they are drawing down. Thinks the driver is the rising rates in the US, which will give them a lot more room for margin and global reach. They are one of the survivors of the financial chaos and came out stronger than when they went in. Dividend yield of 3.01%.