We recently published a list of Jim Cramer Says You Should Buy These 10 Stocks. Since JPMorgan Chase & Co (NYSE:JPM) ranks 2nd on the list, it deserves a deeper look.
Jim Cramer last week talked about the decline of tech stocks after the latest CPI report, saying investors “abandoned” tech stocks like “rats from the sinking ship.”
“It was titanic! They took their money and went all in on small and medium-sized companies we call the Russell 2000 because we got a much softer than expected consumer price index.”
Cramer said that the latest CPI number shows inflation “has been beaten” and interest rates are “coming down.” The CNBC host said if we keep getting positive data, he won’t be surprised to see not one but two or three rate cuts this year.
Cramer wondered how major tech companies could fall on the low inflation numbers, and answered his own question by saying that sometimes in the backdrop of lower bond yields stocks of companies that “need lower rates” can suddenly rise.
“What happened today always happens when rates plunged,” Cramer said.
However, Cramer said that there isn’t enough positive data available yet to keep supporting this rally of stocks that benefit from lower rates, adding that such short-term rallies last for about three days. Cramer predicted that big tech stocks will be back after a “few more plunging days.”
For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s bullish on. With each company we have mentioned the number of hedge fund investors. 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 Investors: 112
Jim Cramer is bullish on JPMorgan Chase & Co (NYSE:JPM) and said in a recent program that he believes the stock could touch the $1 trillion market cap. Cramer said that JPMorgan Chase & Co (NYSE:JPM) is one of the “best banks in the world” and sells only 12 times earnings. The CNBC host said this multiple is “way” too low and “way lower” than the average stock for the S&P 500.
“If the Fed starts cutting I think this one can undergo some huge multiple expansion.”
Cramer thinks that JPMorgan Chase & Co (NYSE:JPM) has generated a level of “earnings consistency” that merits a “much higher stock price.”
However, he thinks it would take a “couple of years” before this stock could hit the $1 trillion market cap.
While JPMorgan Chase & Co (NYSE:JPM) managed to beat estimates on the latest earnings report, its earnings were helped by one-time benefit from its Visa stake exchange. The bank also increased its provision for credit losses that shows expected problems from bad loans ahead. However, amid signs of easing inflation and JPMorgan Chase & Co’s (NYSE:JPM) dominance in the banking industry, the risks that the bank faces are capped.
In its latest report JPMorgan Chase & Co (NYSE:JPM) kept its net interest income guidance it gave in May. Following a steep decline in 2020 and 2021 during the COVID-19 pandemic, its net interest income has nearly doubled from a low of $52.3 billion in FY 2021 to $91.6 billion currently (on a TTM basis). Upbeat NII is driven by a favorable interest rate environment and stable loan balances.
While JPMorgan Chase & Co (NYSE:JPM) looks undervalued based on its P/E ratio when compared to the broader market, it’s not a fast growth stock. Wall Street expects JPMorgan Chase & Co (NYSE:JPM) earnings to grow just over 1% over the next five years annually.
Its dividend yield is 2.2% with over a decade of consistent dividend increases. In this backdrop, JPMorgan Chase & Co (NYSE:JPM) is a suitable income stock for investors looking for stability instead of strong growth.
Carillon Eagle Growth & Income Fund stated the following regarding JPMorgan Chase & Co. (NYSE:JPM) in its first quarter 2024 investor letter:
“JPMorgan Chase & Co. (NYSE:JPM) contributed positively to performance following solid financial results and positive guidance for the remainder of 2024. Moreover, growing chatter around rising capital markets activity likely contributed to the stock’s strong performance relative to other banks. Recall that JPMorgan has a robust capital markets franchise.”
Overall, JPMorgan Chase & Co (NYSE:JPM) ranks 2nd on Insider Monkey’s list titled Jim Cramer Says You Should Buy These 10 Stocks. While we acknowledge the potential of JPMorgan Chase & Co (NYSE:JPM), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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.
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Disclosure: None. This article is originally published at Insider Monkey.
