Tag Archives: JPM

Is The Economy Overheating? – Cramer’s Mad Money (5/17/18)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Thursday, May 17.

The economy is running too fast and is getting hotter. Cramer thinks someone will get hurt if the Fed keeps raising interest rates. After weaker than expected nonfarm payrolls, the street expected Fed to not raise rates aggressively. However, after the jobless claims data, the Fed could raise rates faster than expected. “That’s the lowest jobless claims figure since December 1969, when we had a 120M fewer people in this country,” said Cramer.

The Fed put the benchmark funds rate at a target of 1.5-1.75%. The chances of June rate hike is 95%. The Fed will keep raising rates to fend off inflation but higher rates make it expensive to borrow money which will slow down the economy.

Based on conference calls, Cramer sees inflation in retail, oil, lumber and his personal barometer, corrugated cardboard used in Amazon boxes. Besides that, there is digital deflation caused by the likes of Amazon, cloud companies who are doing more with less.

“In other words, when the economy gets too hot, we have these mechanisms in place that will cause it to cool back down, and that’s where you might get hurt,” concluded Cramer.

CEO interview – Canopy Growth Corp (OTCPK:TWMJF)

Cramer had said that as marijuana gets legal, the profits will go down. Pot is expensive only because it is illegal in many states. Cramer interviewed CEO Bruce Linton of Canada based Canopy Growth Corp. which has applied to be the first cannabis company to be listed on NYSE.

Linton said that legalizing marijuana at the Federal level in the US will result in fewer prescriptions of addictive substances such as opioids. The company has both medical division and recreation division. Constellation Brands (NYSE:STZ) has taken 9.9% stake in the company and partnership with them could result in a new low-calorie beverage. Marijuana has disrupted sales of other products such as alcohol and sleep aids around the globe.

“Cannabis is a huge disruptor to the opioid guys. Opioids, including heroin and fentanyl, were involved in more than 42,000 overdose deaths in 2016, according to the Centers for Disease Control and Prevention. The opioid epidemic affects American children as well. The number of pediatric opioid hospitalizations requiring intensive care nearly doubled to 1,504 patients between 2012 and 2015, from 797 patients between 2004 and 2007, according to a study published in the peer-reviewed medical journal Pediatrics,” said Linton.

They are Canada’s biggest weed company and their products are sold in 7 countries. There is still a lot of work to be done pairing cannabis products with oncology treatments for pain relief and loss of appetite. There is a big opportunity in the animal health market as well.

The company is regulated with the German standards and has real profits and revenue.

Expectations are killing stocks

Stock movement are all about expectation. That was the case with Masco (NYSE:MAS), Owens Corning (NYSE:OC) and Stanley Black & Decker (NYSE:SWK). All these stocks had a good run in 2017 but have fallen in 2018 due to housing related weakness.

Masco and Stanley Black & Decker have fallen 19% while Owens Corning has fallen 30% in 2018. Cramer called it a case of high expectations. When the companies posted good results, it wasn’t enough to impress the street as they did not blow past the expectations.

The worry of rising interest rates and commodity costs hit the stocks further. In the current quarter, Black & Decker just met expectations, Masco missed earnings and Owens Corning posted bad results that led the entire group to go down.

These stocks are cheap – Stanley Black & Decker trading at PE of 15, Masco at 13 and Owens Corning at 10 but looking at the challenges of the current environment, they are not cheap. Cramer thinks Stanley Black & Decker is the only one worth buying as it’s least levered to housing.

Consumer packaged goods and housing stocks

Cramer reviewed two important groups in the stock market – consumer packaged stocks and homebuilders. Most of the CPG companies are down by 30% while homebuilder stocks are down by 20%.

As the interest rates keep rising, the money managers are ditching the homebuilder stocks despite good earnings. The same case is with CPG stocks where the inflation and commodity costs are rising. Although there is yield protection in CPG stocks, it’s not big enough to offset the rise in costs.

Cramer thinks these companies cannot survive just based on good earnings as the market has turned their back on them. There are easier ways to make money so he advised staying away from these groups.

Estee Lauder (NYSE:EL) is a CPG company that is going against the trend but this is seen less of a CPG company and more of an aspirational brand company.

Viewer calls taken by Cramer

Barclays (NYSE:BCS): Why go down the food chain when good banks like JPMorgan (NYSE:JPM) are there.

Honeywell International (NYSE:HON): It’s a good company that is also called a play on e-commerce. Buy it.

Huntington Ingalls Industries (NYSE:HII): It is growing. Hold the stock.

Herbalife (NYSE:HLF): It’s up more than 50% for the year. Let it come down below $50 to buy.

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Dubuque Bank & Trust Co. Has $18.29 Million Holdings in JPMorgan Chase (JPM)

Dubuque Bank & Trust Co. lowered its holdings in JPMorgan Chase (NYSE:JPM) by 0.6% in the fourth quarter, according to the company in its most recent disclosure with the SEC. The firm owned 170,979 shares of the financial services provider’s stock after selling 1,049 shares during the quarter. JPMorgan Chase accounts for about 2.8% of Dubuque Bank & Trust Co.’s holdings, making the stock its 4th biggest position. Dubuque Bank & Trust Co.’s holdings in JPMorgan Chase were worth $18,285,000 as of its most recent filing with the SEC.

A number of other institutional investors have also added to or reduced their stakes in the business. Welch Investments LLC purchased a new position in shares of JPMorgan Chase in the third quarter valued at $103,000. Cerebellum GP LLC purchased a new position in shares of JPMorgan Chase in the fourth quarter valued at $119,000. Price Wealth Management Inc. purchased a new position in shares of JPMorgan Chase in the fourth quarter valued at $124,000. Lipe & Dalton purchased a new position in shares of JPMorgan Chase in the third quarter valued at $143,000. Finally, Americafirst Capital Management LLC purchased a new position in shares of JPMorgan Chase in the third quarter valued at $143,000. 74.26% of the stock is owned by institutional investors.

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A number of research analysts have recently weighed in on JPM shares. Morgan Stanley raised their price target on JPMorgan Chase from $128.00 to $133.00 and gave the company an “overweight” rating in a research report on Friday, February 2nd. Zacks Investment Research upgraded JPMorgan Chase from a “hold” rating to a “buy” rating and set a $129.00 price target for the company in a research report on Monday, March 19th. Vetr upgraded JPMorgan Chase from a “sell” rating to a “hold” rating and set a $105.98 price target for the company in a research report on Monday, February 12th. Edward Jones upgraded JPMorgan Chase from a “hold” rating to a “buy” rating in a research report on Thursday, March 22nd. Finally, Credit Suisse Group lifted their price objective on JPMorgan Chase from $125.00 to $127.00 and gave the stock an “outperform” rating in a research report on Monday, March 19th. Two analysts have rated the stock with a sell rating, thirteen have issued a hold rating and fourteen have given a buy rating to the company’s stock. The company presently has an average rating of “Hold” and an average target price of $112.75.

In other news, Director Todd A. Combs acquired 13,000 shares of JPMorgan Chase stock in a transaction dated Monday, May 14th. The shares were acquired at an average cost of $114.61 per share, with a total value of $1,489,930.00. Following the purchase, the director now directly owns 18,277 shares of the company’s stock, valued at approximately $2,094,726.97. The acquisition was disclosed in a legal filing with the SEC, which can be accessed through this link. Also, Director Mellody L. Hobson acquired 18,000 shares of JPMorgan Chase stock in a transaction dated Monday, April 16th. The stock was purchased at an average cost of $111.05 per share, for a total transaction of $1,998,900.00. Following the completion of the purchase, the director now directly owns 864 shares in the company, valued at $95,947.20. The disclosure for this purchase can be found here. 0.73% of the stock is owned by insiders.

JPM opened at $112.96 on Friday. The company has a debt-to-equity ratio of 1.19, a current ratio of 1.01 and a quick ratio of 1.01. The stock has a market capitalization of $387.91 billion, a price-to-earnings ratio of 16.44, a price-to-earnings-growth ratio of 1.87 and a beta of 1.24. JPMorgan Chase has a 12 month low of $112.76 and a 12 month high of $113.47.

JPMorgan Chase (NYSE:JPM) last posted its quarterly earnings results on Friday, April 13th. The financial services provider reported $2.37 EPS for the quarter, beating the consensus estimate of $2.28 by $0.09. The company had revenue of $27.90 billion during the quarter, compared to analysts’ expectations of $27.73 billion. JPMorgan Chase had a return on equity of 12.60% and a net margin of 22.53%. The firm’s revenue was up 12.0% on a year-over-year basis. During the same quarter in the previous year, the business earned $1.65 EPS. sell-side analysts forecast that JPMorgan Chase will post 9.05 EPS for the current fiscal year.

The firm also recently declared a quarterly dividend, which will be paid on Tuesday, July 31st. Shareholders of record on Friday, July 6th will be issued a $0.56 dividend. This represents a $2.24 annualized dividend and a yield of 1.98%. The ex-dividend date of this dividend is Thursday, July 5th. JPMorgan Chase’s dividend payout ratio (DPR) is 32.61%.

About JPMorgan Chase

JPMorgan Chase & Co operates as a financial services company worldwide. It operates through four segments: Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management. The Consumer & Community Banking segment offers deposit and investment products and services to consumers; lending, deposit, and cash management and payment solutions to small businesses; residential mortgages and home equity loans; and credit cards, payment processing services, auto loans and leases.

Want to see what other hedge funds are holding JPM? Visit HoldingsChannel.com to get the latest 13F filings and insider trades for JPMorgan Chase (NYSE:JPM).

Institutional Ownership by Quarter for JPMorgan Chase (NYSE:JPM)

Regions Financial Will Go Higher – Cramer’s Lightning Round (5/17/18)

Stocks discussed on the Lightning Round segment of Jim Cramer’s Mad Money Program, Thursday, May 17.

Bullish Calls

Altaba (NASDAQ:AABA): That’s what is left of Yahoo, and Cramer likes it.

Lloyds Banking Group (NYSE:LYG): It’s okay, but Cramer said he prefers JPMorgan (NYSE:JPM) instead.

Vistra Energy (NYSE:VST): Book profits on half and let the rest run.

Regions Financial Corp. (NYSE:RF): This is a good bank that has had a big run. It will go higher.

Banco Santander (NYSE:SAN): It’s not great but it’s okay, as it is struggling with the rest of Europe.

Bearish Calls

International Game Technology (NYSE:IGT): Cramer does not see a growth catalyst for the company.

PolarityTE (NASDAQ:COOL): The stock has had a big run. It’s time to book profits.

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4 Takeaways From Berkshire Hathaway's Annual Meeting

Every year at Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) annual meeting, CEO and Chairman Warren Buffett and Vice Chairman Charlie Munger spend hours answering questions on investing and life in general.  Even though many of the questions asked are pertinent to Berkshire’s businesses, there are always a few takeaways for investors. 

For tens of thousands of shareholders, it’s a can’t-miss event and people travel to Omaha from all over the world to get Buffett and Munger’s perspectives.

Below are four of them that stood out.  

1. Are Treasury Bonds are a “Terrible Investment”?

When asked about his outlook for interest rates on U.S. Treasurys, Buffett said nobody knows where they’re headed, himself included. But, he did say U.S. Treasury Bonds are a “terrible investment at current rates or anything close to current rates.”

Buffett’s reasoning against long-term Treasury bonds is that the Federal Reserve has been vocal about targeting 2 percent inflation and U.S. Treasury bonds yield a little over 3 percent, which would drop to somewhere around 2.5 percent after taxes. Therefore, individual investors are getting only about a 0.5 percent return after inflation and taxes.

2. No Worries About a Trade War with China

The prospect of a trade war, as well as political back-and-forth between global leaders, added some volatility to markets over the past few months. Ahead of the shareholders’ meeting, U.S. officials were in China to negotiate trade between the two countries.

When asked about the current situation between the U.S. and China, Buffett said that global trade is a “win-win situation,” but he acknowledged that you do run into some problems when “one side or the other may want to win a little bit too much and then you have a certain amount of tension.”

Later, when asked about the impact of steel tariffs on Berkshire’s businesses, Buffett said: “I don’t think either country will dig themselves into something that precipitates and continues any kind of real trade war.”

3. Buffett and Munger Are No Fans of Cryptocurrencies

“Cryptocurrencies will come to bad endings,” Buffett said. And Vice Chairman Charlie Munger has crudely summed up his negative opinions on several occasions.

Buffett and Munger’s opinions on bitcoin really aren’t much of a surprise. Bitcoin is often referred to as digital gold, and Buffett isn’t a fan of gold either. Over the course of thousands of years, gold’s compound rate has been only a “couple tenths of a percent,” Buffett pointed out.

Throughout his investing career, Buffett has typically shunned unproductive assets. Instead, Buffett prefers productive assets like a bond that generates an acceptable level of income or a stock that represents ownership in a business.

4. Berkshire’s Healthcare Venture Should Have a CEO Soon

Shares of health insurers, pharmacy benefit managers, and some drugmakers took a beating when JPMorgan Chase & Co. (NYSE: JPM), Amazon.com, Inc. (NASDAQ: AMZN) and Berkshire Hathaway announced they would be teaming up to improve healthcare for their employees, specifically with the goal of improving employee satisfaction and lowering costs.

The healthcare partnership came up a few times and Buffett said the three companies are in the process of finding the right CEO for the job, and they should be able to announce who that is “before too long."

Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

Better Buy: Bank of America Corporation vs. JPMorgan

A decade after the financial crisis, big banks have seen their businesses recover and become stronger than ever. Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) have the most assets of any two U.S. banks, and their stocks have done quite well recently.

At this point, interest rates are starting to become more favorable for banking institutions, and both B of A and JPMorgan have consumer-facing operations that can take advantage of those trends. Yet after already having seen their shares climb, smart investors want to know which big bank is the smarter play right now. Below, we’ll look more closely at Bank of America and JPMorgan by using some key metrics that should reveal how the two are doing and which has more promising prospects for shareholders.

Stock performance and valuation

Both Bank of America and JPMorgan have delivered solid performance over the past 12 months. Their returns are nearly identical, with JPMorgan just eking out the win, rising 25% compared to B of A’s 24% gain since May 2017.

Three people in an open lobby with a sign saying Chase in the background.

Image source: JPMorgan Chase.

In terms of simple earnings-based valuations, the two stocks are quite close to each other. If you start with backward-looking profits, JPMorgan looks a little cheaper, trading at 17 times trailing earnings compared to a multiple of 19 for B of A. However, the two banks switch places when you look at projected forward earnings, as Bank of America trades with a forward multiple of just 10, compared to JPMorgan’s corresponding figure of 11.

However, investors often judge asset quality by offering a bigger premium to book value, and there, B of A looks cheaper. The Charlotte-based bank trades at just 1.2 times book value, compared to more than 1.6 for JPMorgan. That’s enough to give Bank of America a slightly cheaper look, but it’s one that JPMorgan shareholders would argue shows greater market confidence in their stock rather than B of A’s.

Dividends

Bank investors have had to be patient to see dividends come back at many financial institutions. Bank of America and JPMorgan have both strived to restore former payouts. JPMorgan’s 2% yield outpaces the 1.6% yield that Bank of America currently pays.

JPMorgan had a real edge in getting its dividend back to where it had been before the financial crisis. With its first post-crisis dividend boost coming in 2011, the New York-based bank was able to surpass its old record payout by 2014. Since 2010, the company has raised its dividend eight times and now pays more than 11 times what it did at the bottom of the market. By contrast, Bank of America didn’t make its first dividend increase until 2014, and although the current $0.12 per share payout is 12 times what it paid throughout most of the early 2010s, it still pales in comparison to its pre-crisis quarterly distributions. JPMorgan has a clear edge on the dividend front.

Growth prospects and risk

2018 is shaping up to be a good year for banks, and both B of A and JPMorgan are aiming to take advantage. Bank of America’s first-quarter results showed impressive growth in most key areas, including outstanding loans, total deposit balances, brokerage assets at its Merrill Edge consumer brokerage unit, and total assets under management at B of A’s wealth management operations. More efficient operations have helped boost returns on equity and assets, and the company has embraced the digital revolution by making a wider range of services available by mobile device. Although the company didn’t take full advantage of market volatility during the first quarter by boosting trading revenue, Bank of America still expects interest spreads to rise further, adding to overall profitability over time.

For JPMorgan, the first quarter had a lot of good news. Growth in core loans and deposits outpaced Bank of America’s gains, and JPMorgan also saw nice rises in client investment assets, commercial loans, credit card transactions, and wealth management. JPMorgan also got a nice boost from its equity trading unit, which saw record-high revenue. As with B of A, fixed-income trading at JPMorgan Chase was sluggish, but attention to cost discipline and a nice tailwind from lower tax rates under the new tax laws helped to push the bank forward. JPMorgan sees strong economic conditions globally, and it believes that those favorable factors will continue to help the bank grow throughout 2018 and beyond.

Staying on the fast track

Bank of America has done a lot to bounce back more aggressively over the past year, but JPMorgan Chase was quicker to start growing again after the crisis, and it’s maintained that head-start. Even with higher valuations, JPMorgan looks like the better buy for those who want to maximize their chances for future growth.

Buy Bank of America Corp Stock on Strong Earnings Results

On Monday, Bank of America Corp (NYSE:BAC) reported fiscal first-quarter results. The banking giant beat on both earnings per share and revenue expectations. Despite the good results, BAC stock was down in early Monday trading before rallying about 1% in the afternoon.

So what gives?

Unfortunately for bullish investors, the reaction by Bank of America stock isn’t much of a surprise. It follows the same pattern — top- and bottom-line beat, followed by a stock-price decline — as JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc (NYSE:C) and Wells Fargo & Co (NYSE:WFC).

The price action creates a quandary to many investors, given the fundamental backdrop the banks are operating within. Interest rates are on the rise, allowing the banks to pocket billions more in profit on an annual basis. The economy is good, growth is strong and the valuations are downright cheap.

The lack of enthusiasm following the results is surprising. One reason could be the fear of an inverting bond spread. I touched on this fear recently with JPMorgan. Despite JPM’s great earnings results, shares turned lower too.

As the yield spread between between long-term Treasuries and short-term Treasuries continues to shrink, many fear what this could be trying to tell us. Bears will say that it means we could be approaching a recession. The 10-year and 2-year Treasury yield spreads and the 30-year and 5-year yield spreads are at their lowest levels since 2007, the time of the financial crisis. Coupled with the Federal Reserve decreasing its balance sheet, the economy could be on shaky ground.

Bulls, on the other hand, have a simple explanation. Following the Great Recession, the Fed was forced to cut interest rates down to zero in hopes of spurring economic growth. Now that the economy is chugging along with encouragement, we need to “normalize” these interest rates and raise them. That — the bulls say — is inflating the yield on short-term bonds while having less of an effect on long-term Treasuries.

The Quarter and Year for BAC

That all seems complicated and under the radar to many investors. But it’s a serious concern being talked about on Wall Street. How it relates to BAC stock specifically is outside of my scope, though. Meaning that, if a recession were looming on the horizon, which I don’t believe to be the case for 2018, then why wouldn’t more stocks be under pressure? Why just the banks? Any cyclical business would be at risk, as would the market as a whole.

When I look at BAC stock, it doesn’t scream “sell!” If anything, I want to find a spot to buy the bank.

In the quarter, revenue grew 3.8% year over year (YoY), while earnings per share of 62 cents came in 3 cents per share ahead of expectations. While revenue growth was just okay, earnings jumped almost 40% YoY. That’s tremendous growth and not just a one-time boost.

Analysts see the company’s fiscal first quarter playing out for the whole year. Meaning that they expect 3.8% revenue growth in 2018 and full-year earnings growth of 36%. That’s darn impressive; and 2019 shouldn’t be weak either. Short of a recession, analysts are looking for sales growth to accelerate to 4.1% and for earnings to grow another 14%.

It leaves BAC stock trading at a paltry 11.8 times 2018 earnings and at just 10.4 times 2019 estimates. While not massive, it’s also worth noting that Bank of America stock has a 1.6% dividend yield too. How can shares sell at such a discount given this growth rate and strong backdrop?

That’s one reason why, like JPM, I think shares should be heading higher, not lower, on earnings.

Trading Bank of America Stock

Support at $29 has been quite strong, despite there being no obvious reason as to why — at least when looking at the charts that is. Still, though, this level held up during panic selling in the S&P 500 in February, as well as further trade-war selling in March. It’s still holding above this level post-earnings.

trading BAC stock price
Click to Enlarge

This leads me to believe that BAC stock will stay above these levels. Below $29 and I would become much more concerned. It would also be more encouraging to see Bank of America back above its 50-day and 100-day moving averages. If so, it puts a retest of the $32.50 breakout we were watching last month back in play.

Keep in mind Goldman Sachs Group Inc (NYSE:GS) reports earnings on Tuesday, while Morgan Stanley (NYSE:MS) reports earnings on Wednesday.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held a position in JPM. 

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