Is JPMorgan Chase & Co. (JPM) the Best Financial Stock to Buy According to Hedge Funds?

We recently compiled a list of the 10 Best Financial Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where JPMorgan Chase & Co. (NYSE:JPM) stands against the other best financial stocks to buy according to hedge funds.

According to the Business Research Company, the market for financial services has expanded significantly in the last several years and is further expected to grow at a compound annual growth rate (CAGR) of 7.7% in the next few years.

The year 2024 was remarkable for the financial sector, as seen by the Financial Sector Index, which rose over 30% as of mid-December and outperformed the broader market by almost 5 percentage points. This expansion came after worries over mid-sized bank failures in early 2024, which turned out to be isolated events rather than a problem affecting the entire industry.

As of January 7, 2025, the market’s financial sector produced returns of 5.51% over three years, 9.68% over five years, and 9.49% over ten years. These numbers, however, pale in comparison to the sector’s remarkable success during the previous 12 months, which saw a return of 28.01%.

Looking forward, according to Fidelity’s report, the financial industry’s prospects for 2025 seem promising, backed by consistent economic expansion in the United States. It is projected that the Federal Reserve’s move to rate decreases in the second half of 2024 will boost confidence and lower credit risk. Falling rates have the potential to boost lending and deposit growth while also reducing net interest margins.

As per Fidelity analyst Matt Reed:

“Lower rates boost economic momentum, benefiting banks and payment processors alike.”

Banks that are well-diversified and have solid fundamentals are better equipped to handle a soft landing situation. Sensitive to consumer spending, payment processors are likewise poised for expansion as more accommodating monetary policy and strong consumer activity coincide.

Risks still exist, though. As per the aforementioned report, if the economy weakens, some lenders may face difficulties due to their exposure to commercial real estate and possible nonperforming loans. Nonetheless, financials start 2025 with significant momentum due to a less stringent regulatory agenda following the election and more prospects for mergers and acquisitions.

Michael Kantrowitz, chief investment strategist at Piper Sandler stated:

“I think investors have rotated a little bit out of some of the big tech companies and into the big financial companies,”

He claimed that while a lot of optimism about artificial intelligence (AI) is priced into tech businesses, some investor movement made sense since the rate environment has improved for bank earnings.

Deloitte’s 2025 banking and capital markets outlook report states that banks can strengthen their basis for sustainable growth with creativity and discipline as the banking industry adjusts to a low-growth, lower-rate environment. According to the report, the baseline scenario for economic growth in 2025 is projected to fall to 1.5%, with possible deviations between 1.0% and 1.9% due to slowing consumer spending, greater unemployment, and sluggish business investment. By Q2 of 2024, consumer debt had risen to $17.7 trillion, and by March 2024, savings from the pandemic had been spent, further straining the economy. Inflation is forecast to be around 2%, allowing for three to four rate cuts, bringing the federal funds rate down to 350-375 basis points. Treasury yields are projected to fall, and following two years of inversion, the yield curve may normalize. With the exception of economies that are under pressure, global central banks will likely choose to cut benchmark rates.

Is JPMorgan Chase & Co. (JPM) Cheap NYSE Stock To Invest In Now?

A group of business people discussing plans around a boardroom table adorned with a financial services company logo.

Methodology

We sifted through holdings of financial ETFs and online rankings to form an initial list of 20 financial stocks. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 900 hedge funds in Q3 2024 to gauge hedge fund sentiment for stocks.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

JPMorgan Chase & Co. (NYSE:JPM

Number of Hedge Fund Holders: 105

One of the Best Financial Stocks JPMorgan Chase & Co. (NYSE:JPM), with assets of around $4.1 trillion, is one of the biggest and most complex financial firms in the US. It is divided into four key segments: consumer and community banking, corporate and investment banking, commercial banking, and asset and wealth management. The company is regulated in many countries where it conducts business.

JPMorgan Chase & Co. (NYSE:JPM) is perhaps the most dominant bank in the United States, with leading franchises in investment banking, commercial banking, credit cards, retail banking, and asset and wealth management. Though few other businesses have been able to implement a similar approach, the bank’s combination of scale, diversity, and careful risk control is a straightforward route to competitive advantage. Although even the most effectively managed banks occasionally make errors, the business has appeared to be able to put everything together more effectively and with fewer mistakes than its competitors.

JPMorgan Chase & Co. (NYSE:JPM)’s Q3 of 2024 revenue increased by 6% year on year to $43.3 billion, led by a rise of 31% YoY in investment banking fees, a 27% YoY increase in equity market revenue, and a 15% YoY increase in asset management fees. While assets under management increased by 23% to $3.9 trillion, consumer card loans increased by 11%. The firm maintained its top spot in retail deposit share for four years in a row. Higher interest rates and the expansion of loans drove the firm’s Q3 2024 net interest income, which increased 30% year over year to $22.9 billion.

Glenn Schorr, an analyst at Evercore ISI, increased his price target for JPMorgan Chase & Co. (NYSE:JPM) from $238 to $264 on January 2, 2025, and maintained his Outperform rating for the company’s shares. The analyst notes that after a “pretty strong” September and October, investment banking activity levels continued to decline into December, and that equity markets sold off by roughly 2% in December in “a post-post-election breather driven largely by the realization” that rate cuts might not be as imminent as thought.

Ken Griffin’s Citadel Investment Group was the largest stakeholder in the company among the funds in Insider Monkey’s database. It owns 16.78 million shares worth $3.54 billion as of Q3.

Overall, JPM ranks 4th on our list of the Best Financial Stocks To Buy According to Hedge Funds. While we acknowledge the potential for JPM to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JPM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

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