JPMorgan Chase Stock is a Bond
- Ishfaaq Peerally
- Feb 10, 2021
- 2 min read
🏦 I got a comment on my last video analysis of JPMorgan Chase $JPM that it is like investing in a bond. I've been holding JPMorgan Chase Stocks since 2016 along with Apple $AAPL . But unlike Apple, I am still buying JPM. 𝙄𝙨 𝙞𝙩 𝙧𝙚𝙖𝙡𝙡𝙮 𝙖𝙨 𝙨𝙖𝙛𝙚 𝙖𝙨 𝙖 𝙗𝙤𝙣𝙙? 𝘿𝙤𝙚𝙨 𝙞𝙩 𝙧𝙚𝙖𝙡𝙡𝙮 𝙥𝙧𝙤𝙫𝙞𝙙𝙚 𝙘𝙤𝙣𝙨𝙞𝙨𝙩𝙚𝙣𝙩 𝙥𝙖𝙮𝙢𝙚𝙣𝙩 𝙡𝙞𝙠𝙚 𝙖 𝙗𝙤𝙣𝙙?
🔢 Warren Buffett likes to look at stocks as if they are bonds since it is easy to find the intrinsic value (or present value) of a bond. The earnings yield of JPM today is 6.5%, which is better than treasury yields (eg. TLT $TLT at 1.5%) and even junk bonds ( $JNK at 5.0%). The earnings yield of the S&P 500 $SPX500 is 2.5%. JPM is one of the rare stocks which we can call safe still 𝙬𝙞𝙩𝙝 𝙖𝙣 𝙚𝙖𝙧𝙣𝙞𝙣𝙜𝙨 𝙮𝙞𝙚𝙡𝙙 𝙝𝙞𝙜𝙝𝙚𝙧 𝙩𝙝𝙖𝙣 𝙟𝙪𝙣𝙠 𝙗𝙤𝙣𝙙𝙨, which would have been normal if we were not in a stock market bubble.
🇺🇸🌎 The 𝙬𝙤𝙧𝙠𝙞𝙣𝙜 𝙚𝙣𝙫𝙞𝙧𝙤𝙣𝙢𝙚𝙣𝙩 𝙛𝙤𝙧 𝙗𝙖𝙣𝙠𝙨 𝙞𝙨 𝙗𝙖𝙙 with zero interest rates, quantitative easing and the Dodd-Frank Act of 2011. But JPMorgan Chase has shown resilience. Its ROE is the highest among the big banks and is back to pre pandemic levels. It is because they are expanding their business both domestically and internationally. By mid-2021 Chase will be in all 48 lower states and may soon overtake Wells Fargo as the bank with the most branches in the US. JPMorgan is already the largest investment bank in the world. JPMorgan Chase also has a great management with Jamie Dimon considered to be the greatest CEO in the world.
💰 JPMorgan Chase set aside over $30 billion as reserve for credit losses for last quarter. But only $2 billion was used. They want to 𝙥𝙡𝙖𝙮 𝙞𝙩 𝙨𝙖𝙛𝙚 as uncertainties still loom with this pandemic and recession.
💸 JPMorgan Chase is safe and can provide consistent payment, something we will usually see with a bond. Calling JPM stock a bond can be dangerous in the short-term as it is more correlated with stocks. But if we're looking at the long-term, then the correlation becomes irrelevant. This is a stock 𝙩𝙤 𝙗𝙪𝙮 𝙞𝙣 𝙖𝙣𝙮 𝙘𝙤𝙧𝙧𝙚𝙘𝙩𝙞𝙤𝙣 𝙖𝙣𝙙 𝙝𝙤𝙡𝙙 𝙛𝙤𝙧𝙚𝙫𝙚𝙧.
Watch the full video on YouTube:
Here’s the full analysis of JPMorgan Chase:
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