Top Stocks JPMorgan Chase & Co. Is Buying

Aug.12.11 | About: JPMorgan Chase (JPM)

JP Morgan Chase and Co. (JPM) manages ~ $200 bn in equity assets primarily through its asset management subsidiary JP Morgan Asset Management. The firm caters to high net-worth individuals, corporations, pension and profit sharing plans, charitable organizations and institutions.

Investment Strategy: JP Morgan Asset Management offers various strategies, including active extension, behavioral, core, enhanced, growth, long/short, quantitative and value. Investments are carried out through U.S., international and global portfolios. Emphasis is placed on identifying and monitoring key valuation and risk metrics. For the domestic investments, the firm primarily employs fundamental research to identify favorable investments. A three-step process is applied, combining research, valuation and stock selection. J.P. Morgan purchases companies that are undervalued and considers selling them when they appear to be overvalued. In addition to valuation, the firm looks for a catalyst that could prompt a rise in a stock's price, a high potential reward compared with potential risk, or temporary mispricings due to market overreactions.

The following is a list of top stocks (by market value) that JP Morgan Chase and Co. bought in the last quarter, as released in its most recent 13F filing with the SEC.

Stock

Symbol

Shares Held - 03/31/2011

Shares Held - 06/30/2011

Covidien Plc

COV

0

17013345

Schlumberger Limited

SLB

14719227

20857692

St. Jude Medical Inc.

STJ

585434

9280084

Becton, Dickinson and Company

BDX

2308880

6949065

Johnson & Johnson

JNJ

17578855

23306521

General Motors Company

GM

17716564

28629306

Lam Research Corporation

LRCX

7645755

14682333

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My favorites among the above stocks are Johnson & Johnson and Covidien.

Johnson and Johnson is one of the safe havens in current uncertain environment with rising concerns regarding another recession. JNJ outperformed most of the other large caps and S&P 500 (NYSEARCA:SPY) during the last recession despite two major patent expirations (Risperdal in 2Q08, Topamax in 2Q09) that slowed sales growth. In this downturn JNJ is poised even better with only modest patent expirations that should be more than offset by several major new drug launches like Xarelto (stroke and DVT prevention), Zytiga (prostate cancer), Incivo (Hep C) and Edurant (HIV). Trading at 12x forward EPS JNJ is a good fundamental and dividend stock. Jim Cramer also recommended buying JNJ stock recently.

Covidien is another good company to go long on. Analysts from MorganStanley and Goldman have recently suggested buying its stock. Bank of America also released a positive report on the stock a few days back. In addition to JP Morgan, Covidien is also one of the top buys of PNC Financial Services and BlackRock. As I mentioned in a previous article, accelerating organic revenue growth, beatable consensus numbers and low PE multiple makes the stock attractive. The stock is likely to rise going forward and its FY2012 guidance on September 8 (analyst day) is likely to serve as a major catalyst.

For other stocks in the above list, here are some of the specifics about these companies, including a brief description of their businesses, growth expectations (top line and bottom line):

Schlumberger Limited is a supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. Schlumberger consisted of five business segments as of December 31, 2010: it Oilfield Services, WesternGeco, M-I SWACO, Smith Oilfield and Distribution. Schlumberger’s EPS forecast for the current year is $3.82 and next year is $5.46. According to consensus estimates, its top line is expected to grow 44.10% in the current year and 19.00% next year.

St. Jude Medical, Inc. develops, manufactures and distributes cardiovascular medical devices for the global cardiac rhythm management, cardiology and cardiac surgery and atrial fibrillation therapy areas and neurostimulation medical devices for the management of chronic pain. St. Jude operates in four segments: Cardiac Rhythm Management, Cardiovascular, Atrial Fibrillation and Neuromodulation. St. Jude Medical's EPS forecast for the current year is $3.30 and next year is $3.67. According to consensus estimates, its top line is expected to grow 10.20% in the current year and 7.40% next year.

Becton, Dickinson and Company is a global medical technology company engaged in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. BD’s operations consist of three business segments: BD Medical, BD Diagnostics and BD Biosciences. BD's EPS forecast for the current year is $5.67 and next year is $6.25. According to consensus estimates, its top line is expected to grow 5.90% in the current year and 5.90% next year.

General Motors Company is a global automotive company. It develops, produces and markets cars, trucks and parts worldwide. GM also provides automotive financing services through General Motors Financial Company, Inc., formerly AmeriCredit Corp. GM's EPS forecast for the current year is $4.01 and next year is $4.87. According to consensus estimates, its top line is expected to grow 8.20% in the current year and 8.60% next year.

Lam Research Corporation is a supplier of wafer fabrication equipment and services to the worldwide semiconductor industry. The Company designs, manufactures, markets, and services semiconductor processing equipment used in the fabrication of integrated circuits. Its etch and clean technologies enable customers to build integrated circuits. Lam Research's EPS forecast for the current year is $2.99 and next year is $5.35. According to consensus estimates, its top line is expected to decline 15.30% in the current year and grow 7.50% next year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.