Killer Companies: JPMorgan's fall from grace

CEO Jamie Dimon is in an unfamiliar place: The hot seat, as calls for him to give up his chairmanship rise. Still, the stock may now be too cheap to ignore.

By Jonathan Berr May 8, 2013 9:51AM
JPMorgan (JPM) CEO Jamie Dimon has long been considered one of the smartest people on Wall Street. But ever since news broke last year about the outsize bets a trader in the company's London office made, Dimon’s reputation has taken a hit along with his giant Wall Street bank. 
It's easy to see why, given the losses from the so-called "London Whale" totaled $6.2 billion. Although Dimon has repeatedly apologized for the company’s errors, pressure continues to mount on  the New York-based bank to take drastic action. Glass Lewis and Institutional Shareholder Services, the biggest proxy advisory services, urged JPMorgan to force Dimon to relinquish his chairman role, something that would have been unfathomable before the scandal. The services have also called for the ouster of some board members for failing to properly oversee Dimon.

"With the two leading proxy advisory firms recommending investors vote against key directors, it is clear that the status quo can no longer continue," Dieter Waizenegger, of CtW Investment Group, told Bloomberg.

File photo of JP Morgan Chase and Company CEO Jamie Dimon on June 13, 2012 (© Larry Downing/Newscom/Reuters)Dimon, though, has plenty of friends, including such pretty powerful ones as Warren Buffett, the greatest investor in history, and billionaire Ken Langone, the co-founder of Home Depot (HD). Still, the London Whale scandal has cast a cloud over JPMorgan.  

Shares of the biggest U.S. bank have risen more than 11% this year, but that's subpar compared with rivals like Goldman Sachs (GS), which surged 16.5%, and Morgan Stanley (MS) and Citigroup (C), which both jumped more than 20%. JPMorgan's recent mixed earnings report didn't help matters. Although a 33% rise in first-quarter profit beat analysts' expectations, revenue missed forecasts.

Wall Street, though, expects better times ahead. The average 52-week price target on JPM is $56.21, about 15% higher than where it recently traded. The shares are relatively cheap, trading at a price-to-earnings ratio of 8.6, near a five-year low. As an added bonus, JPMorgan offers a nice dividend yield of 3.2%, better than its rivals.

JPMorgan may be down, but it’s hardly out. The stock is worth adding to a portfolio because it's not going to stay in Wall Street’s penalty box forever.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

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2Comments
May 8, 2013 11:05AM
avatar
Jamie Dimon, your reign of Error is just about over.
Might I suggest a spin as the Treasury Secretary,
seeing as Jack Lew probably wont be there too long.

Or, you two could just switch jobs in 6 months,
when the general public has "forgotten".

May 8, 2013 4:10PM
avatar
Dimon would make a great addition to the Fed! Perhaps even the next 'Benny Bucks' Bernanke!
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