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Why JPMorgan Chase (JPM) Is Still the Best Banking Stock?

Alex Smith

Fiduciary Management, Inc recently released its Q1 2020 Investor Letter, a copy of which you can download below. The FMI Large Cap Fund posted a return of -23.0% for the quarter, underperforming its benchmark, the S&P 500 Index which returned -19.60% in the same quarter. You should check out Fiduciary Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Fiduciary Management highlighted a few stocks and Jpmorgan Chase & Co (NYSE:JPM) is one of them. JPMorgan Chase is a multinational investment bank and financial services holding company. Year-to-date, JPM stock lost 38.3% and on May 14th it had a closing price of $87.52. Its market cap is of $263 billion. Here is what Fiduciary Management said:

"JPMorgan is a leading global financial services firm with assets of $2.7 trillion. About half of profit comes from the community bank; a third from the investment bank; and the remainder split between the commercial bank and the asset management arm. JPMorgan is a leading player across all four businesses and has consistently gained market share. The management team, led by Jamie Dimon, prudently invests to grow the bank’s competitive advantage as evidenced by JPMorgan’s technology spend of $12 billion per year – a figure that’s virtually impossible for others to match. An enduring characteristic of JPMorgan is the bank’s fortress balance sheet. The bank carries substantial excess capital and liquidity. As a testament to the strength of the franchise, since 2000, JPMorgan’s pre-tax income compound annual growth rate has outpaced all core peers with lower volatility. 2020 will likely see reserve building, lower investment banking transactions and lower income. The stock trades at a single-digit earnings multiple and has a 3.8% dividend yield. This is a compelling valuation for arguably the best-run bank in the country."

In Q4 2019, the number of bullish hedge fund positions on JPM stock increased by about 4% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with JPM’s growth potential.

Disclosure: None. This article is originally published at Insider Monkey.