We came across a bullish thesis on JPMorgan Chase & Co. (JPM) on Substack by Pacific Northwest Edge. In this article, we will summarize the bulls’ thesis on JPM. JPMorgan Chase & Co. (JPM)’s share was trading at $239.11 as of March 19th. JPM’s trailing and forward P/E were 12.11 and 13 respectively according to Yahoo Finance.
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JPMorgan Chase (JPM) stands as a dominant force in the financial system, with a track record that underscores its strength and resilience. Over the past decade, the bank has repurchased 24.7% of its common stock, a testament to its ability to generate substantial excess capital. While traditional financial metrics like free cash flow are less useful for evaluating banks, JPM’s business thrives on loan origination, where cash outflows represent a growing, healthy loan book rather than a liquidity concern. The bank’s deposit base of $2.4 trillion, although classified as a liability, acts as a virtually cost-free funding source for lending activities, reinforcing the fundamental advantage of the banking model. Unlike standard debt, most deposits do not bear interest or require repayment on a fixed schedule, allowing JPM to deploy capital efficiently while maintaining robust profit margins.
Despite its financial strength, banking is an inherently leveraged business, and the concept of bank runs remains a key risk factor. With only $866 billion in cash and short-term equivalents, JPM—like all banks—would be unable to cover a simultaneous mass withdrawal of deposits. However, its status as a cornerstone of the financial system provides a significant buffer against systemic risks. During the Global Financial Crisis, the U.S. government turned to JPM to stabilize the industry, facilitating its acquisition of Washington Mutual and Bear Stearns—two of the largest collapses in banking history. CEO Jamie Dimon has openly acknowledged that JPM took these deals under government pressure, underscoring its role as a backstop for financial stability. Given its systemic importance, it is difficult to envision a scenario where JPM is displaced as a dominant banking institution.
JPM’s long-term performance against the S&P 500 highlights its ability to compound shareholder value. The bank benefits from rising interest income on loans and credit cards, which acts as a tailwind in higher-rate environments. JPM’s core strength lies in its ability to leverage deposits into profitable lending operations. The bank’s ability to navigate crises and emerge stronger reinforces its position as a premier financial institution. While uncertainty always exists, particularly in banking, JPM remains a compelling long-term investment when acquired at an attractive valuation. Its scale, financial firepower, and systemic importance make it a unique opportunity for investors seeking stability and upside potential in the financial sector.
JPMorgan Chase & Co. (JPM) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 123 hedge fund portfolios held JPM at the end of the fourth quarter which was 105 in the previous quarter. While we acknowledge the risk and potential of JPM as an investment, our conviction lies in the belief that some 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 was originally published at Insider Monkey.