On April 19th, the spouse of JPMorgan Chase & Co. (NYSE:JPM) Board member James Crown purchased 5,000 shares of stock at an average price of $46.99 per share, and between the 19th and the 22nd a number of companies tied to Crown (including The Crown Fund, which manages much of the Crown family’s wealth) bought over 400,000 shares of the bank. Insider purchases tend to be bullish signals (read our analysis of studies on insider trading), and we think that this is because insiders already have an economic connection to the company and so should generally prefer to diversify their wealth. While Crown did not increase his direct holdings (which were reported as almost 260,000 shares), we think it’s safe to assume that his spouse’s purchase at least would be unwise without some degree of confidence in JPMorgan Chase’s prospects. It’s also interesting to note that just a few days ago we had reported on a large insider purchase at Bank of America Corp (NYSE:BAC). Learn more about the insider buy at Bank of America.
JPMorgan Chase & Co. (NYSE:JPM) recently reported its results for the first quarter of 2013. While total net revenue decreased slightly versus a year earlier, the bank slashed its noninterest expenses by 16% and so was able to deliver a 33% increase in net income. We would note that revenue and earnings were both up on a q/q basis. Book value increased yet again, to $52 per share, and tangible book value rose to nearly $40. Currently JPMorgan Chase trades at a small discount to the book value of its equity, with a P/B ratio of 0.9, and at only 9 times its trailing earnings- making it an interesting value prospect in our view.
JPMorgan Chase & Co. (NYSE:JPM) had been one of the most financial stocks among hedge funds in the fourth quarter of 2012 (find more financial stocks hedge funds loved), according to our database of 13F filings. We track these filings to help us research investing strategies (for example, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by 18 percentage points per year on average) but they also come in handy for finding individual funds and other notable investors who like particular stocks. We can see that billionaire Ken Fisher’s Fisher Asset Management disclosed ownership of almost 12 million shares at the end of December (check out more stocks Fisher owned) while billionaire Louis Bacon’s Moore Global increased its stake by 33% to a total of 5.1 million shares (see Bacon’s stock picks).
Bank of America is one peer for JPMorgan Chase, and we can also compare these banks to Citigroup Inc (NYSE:C), Wells Fargo & Co (NYSE:WFC), and Barclays PLC (ADR) (NYSE:BCS). Wells Fargo is the odd one out of this group, as it is actually valued at a premium to book (P/B ratios for the other three banks are in the 0.6-0.8 range), though it is doing well in terms of its earnings with a trailing P/E of 11. This is higher than JPMorgan Chase & Co. (NYSE:JPM)’s multiple, but actually cheaper than some of the struggling- though, theoretically, improving- banks. Citi is valued at 17 times its trailing earnings, with Bank of America being even pricier on those terms, though analyst consensus for 2014 is for considerably stronger performance bringing each down to 9 times projected earnings (note that even this is a more expensive multiple than JPMorgan Chase’s). These two banks did increase their revenue and earnings in their most recent quarter compared to the same period in the previous year. Barclays does post a low forward P/E, and considering its cheapness in book terms it might be worth considering although its business- possibly because of higher exposure to Europe- has not been doing well recently.
We had been interested in JPMorgan Chase & Co. (NYSE:JPM) before this insider purchases on the grounds of it being cheap in terms of both earnings and book; to see these buys from people and groups tied to a Board member makes the bank particularly worthy of further research as far as we are concerned. Of course, the fact that we have seen insider buys at both JPMorgan Chase & Co. (NYSE:JPM) and Bank of America might spark interest in large banks in general.
Disclosure: I own no shares of any stocks mentioned in this article.
