JPMorgan Chase & Co. (NYSE:JPM) this morning reported an increase in earnings in the second quarter to $6.29 billion, or $1.54 per share, up from $5.98 billion, or $1.46 a share, in the prior-year quarter. Income gains were largely driven by the Corporate and Investment Bank division, which earned $2.3 billion compared to $2.1 billion year-over-year. Commercial Banking income on the other hand fell by $152 million year-over-year, while Consumer and Community Banking income posted a slight gain. Wall Street was expecting an EPS of $1.44. However, the financial giant also reported that revenue fell to $24.53 billion, down from $25.34 billion in the same quarter last year, though this still beat estimates as well, with analysts expecting $24.49 billion. Tangible book value per share showed gains of 7% year-over-year, to $46.13. Shares of America’s largest bank by assets rose to a high of $68.90 in pre-market trading, up by about 1%, though the gains have since been clawed back to only slightly above level. Shares of JPMorgan Chase & Co. hit their all-time high in the second quarter at $69.75 per share. Year-to-date, the stock has risen by 7.76%.
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The increase in profits for JPMorgan Chase & Co. (NYSE:JPM) emulates the increase in hedge fund interest in recent months. Total holdings held by the funds tracked by Insider Monkey increased by 8.12% during the first quarter to $7.64 billion, even though the stock slumped by 3.2% in the first quarter. The smart money was vindicated for their faith and investment dollars, however, in the second quarter, as the stock jumped by 11.15%. By the end of March, a total of 95 of the hedge funds tracked by Insider Monkey were bullish in this stock, up from 92 at the end of the fourth quarter.
Hedge funds and other big money managers tend to have the largest amounts of their capital invested in large and mega-cap stocks like JPMorgan Chase & Co. because these companies allow for much greater capital allocation. That’s why if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month, showing that their most popular picks and the ones that received the bulk of their capital were not actually their best picks. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed through backtesting and in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of more than 135%, beating the broader market by over 80 percentage points through the end of April (see the details).
Another area Insider Monkey tracks is insider trades. These transactions can tell people whether certain key insiders of companies are betting on their own company’s stocks. For JPMorgan Chase & Co., Director Michael Neal acquired 9,050 shares of the firm on January 15. The most recent sales by insiders was on April 15 when COO Matthew Zames sold 4,258 shares and General Counsel Stephen Cutler sold 18,617 shares.
Taking this into consideration, we’re going to take a look at the fresh smart money activity regarding JPMorgan Chase & Co.
What does the smart money think about JPMorgan Chase & Co. (NYSE:JPM)?
According to hedge fund intelligence website Insider Monkey, Lansdowne Partners, managed by Alex Snow, holds the largest position in JPMorgan Chase & Co. (NYSE:JPM). Lansdowne Partners has a $1.25 billion position in the stock, held in 20.68 million shares, and comprising 11.3% of its 13F portfolio. Sitting in the number two spot is Fisher Asset Management, headed by Ken Fisher, which holds an $822.6 million position of 13.58 million shares; the fund has 1.6% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Edgar Wachenheim’s Greenhaven Associates, Boykin Curry’s Eagle Capital Management, and Daniel S. Och’s OZ Management.
Consequently, key money managers have been driving this bullishness. Laurion Capital Management, led by Benjamin A. Smith, established the most valuable position of call options, underlying 1.5 million shares of JPMorgan Chase & Co. (NYSE:JPM). Laurion Capital Management had $72.7 million invested in the company at the end of the first quarter. Glenn Greenberg’s Brave Warrior Capital also held a $59.1 million investment in the stock, upping its stake to 4.82 million shares, during the quarter, a 16% increase. The following funds were among the new JPMorgan investors: Thomas E. Claugus’ GMT Capital, John Brennan’s Sirios Capital Management, and Neil Chriss’ Hutchin Hill Capital.
The bullishness of hedge funds coupled with the solid second quarter results for the financial giant makes us conclude that JPMorgan Chase & Co. (NYSE:JPM) is a solid bet at the moment.
Disclosure: None
