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JPM - JP Morgan


shalab

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I've been working on figuring out dilution of the big banks, and found it to be a little harder than I thought.  I've used the following approach to get a rough idea for JPM:

 

buyback for 2016: 0.1404

Change in shares for 2016 and 2015: 0.1023

Difference (= dilution): 0.0381

Dilution %: 1.07%

 

Anyone done this exercise or point out any issues?

 

 

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my average cost on JPM is 42.972, but I've added higher than that, bringing up the average.  I've started to lighten up on it in 2018, but that could prove to be a mistake.  $400 Billion today.  That's a big bank

 

Yes, pretty easy to say - afterwards, and in clear hindsight [ right now].

 

I wonder how many of my fellow board members got in when it was materially lower.

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my average cost on JPM is 42.972, but I've added higher than that, bringing up the average.  I've started to lighten up on it in 2018, but that could prove to be a mistake.  $400 Billion today.  That's a big bank.

 

Awesome to read. Thank you for sharing. To me, it's the worlds best bank, noone near.

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Yes, pretty easy to say - afterwards, and in clear hindsight [ right now].

 

I wonder how many of my fellow board members got in when it was materially lower.

 

Well, I think this is one example of mistakes of omission that he has made (like Walmart), he clearly knows the bank very well, praises management and its approach to risk, reads the shareholder letter, even has Todd as a Board Member and now has partnered with it in the Healthcare initiative. AND he owns JPM stock in his PA.

 

I'm sure he was at least close to buying it at some point or another.

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Yes, pretty easy to say - afterwards, and in clear hindsight [ right now].

 

I wonder how many of my fellow board members got in when it was materially lower.

 

Well, I think this is one example of mistakes of omission that he has made (like Walmart), he clearly knows the bank very well, praises management and its approach to risk, reads the shareholder letter, even has Todd as a Board Member and now has partnered with it in the Healthcare initiative. AND he owns JPM stock in his PA.

 

I'm sure he was at least close to buying it at some point or another.

 

IIRC, he's mentioned before that he hesitates to buy JPM because he already owns it in his PA. In other words, he might catch some flack for buying it in the Berkshire account because people might think he's pumping his own PA -- it would be IMHO a stupid criticism because his exposure to Berkshire is >>> his PA.

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[ftp][/ftp]

I remember when Citi and Bank of America were discussed on the forum a few years ago. I was the small fish following the whales. I still remember jumping from Citi to B of A, then someone on the board mentioned trading up into quality with JPM. I ended up selling B of A to buy JPM.

 

I followed a similar course.  I was looking at the discount to book, and potential dividend expansion, and fell under the spell of that sort of reasoning. 

 

But came around to JPM when I valued quality and strong management more.

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Jamie Dimon spoke for about one hour at the Bernstein Strategic Decisions Conference. If you want to understand what is going on with the big US banks, US economy etc this is a great listen (or read as the transcript is on Seeking Alpha). Amazing company.

 

He feels the US in is a ‘golden age of banking’.

 

- https://www.jpmorganchase.com/corporate/investor-relations/event-calendar.htm

 

Operator: Is there a bull case for the profitability of the banking industry over time, it just gets more efficient as you get more digitization - you know, fewer Brinks trucks driving cash around?

 

Jamie Dimon: You guys thought I was kidding when, years ago, I said you’re going to have a golden age of banking. I mean, you’re going to have a golden age of banking. You have a golden age of banking. With all the regulatory and issues, some of which are disappearing--I mean, you noticed and mentioned in one of your things that satisfaction scores are up everywhere, like almost every bank in almost every business. If you look at a bank, and if you look at JPMorgan Chase and if you step back, don’t look at the bank, look at the financial results alone, they’re extraordinary and consistent year after year after year after year after year - and not just us, okay? So even in ’08, we had a 7% return on tangible equity - that’s pretty good. You go through a year like that with the turmoil that affects the banks. So I think these banks have--and a lot of their businesses are annuity business - custody, cash management, part of asset and wealth management. Even part of trading is a consistent flow. If you look at any part of trading, there’s a part which you know is going to happen - hedging, FX around the world, capital expenses, investments, there’s a consistency. Obviously there’s an episodic part, but people forget about the consistent part too.

 

So to me, yes, these are pretty powerful franchises and profitability is being restored to the ones that didn’t have it, but like I said, you’re going to have real competition, and I think the--I always tell people with JPMorgan, don’t sit there and talk about where’s the competition. They’re coming, they’re always coming, they’re always getting better. They very rarely leave the field of play. It has happened, but very rarely.

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Marazul, JPM trades at the highest P/TBV multiple of all the big US banks (deservedly so). Dimon stated their preference is to use capital to grow the business. Large chunks of stock was repurchased in the past mainly because it was the best use of capital (better use than growing the business). Lots of great choices for the large US banks (what to do with the growing amounts of cash they are generating every year... very high class problem :-).

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Great listening to Dimon. Got the sense he feels that bbacks at these prices do ‘t offer great IRRs, which is difficult to understand.

 

At 2x Tangible book, the retail return potential of buybacks seems muted. I don’t think they will do more than 15% ROE over the cycle, if that.

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Thank you for sharing the link to the interview with Mr. Dimon in your post #291, Viking.

 

I listened to it today. If one listens carefully to what Mr. Dimon was saying during the interview, to me, it's actually striking, how long term oriented he is in his view of running JPM. I was quite surprised to hear him mentioning the three big Chineese banks and Alibaba as potential future competitors going forward. His mindset is really long term. He certainly does not think in 10-Qs, or even 10-Ks. His mindset is to invest in the future of the bank, long term.

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