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JPMorgan Chase (NYSE:JPM) is among the most profitable investment companies. Last year, the company earned $4.14 billion in advisory fees. With $1.492 trillion in current assets, JPMorgan is one of the largest institutional investors in the stock market. The investment titan offers 118 mutual funds managed by money managers. 49 of these funds invest in equity markets (34 U.S. equity funds and 15 international funds).

As of Q2 2011, JPMorgan fund advisors had a diversified portfolio of equities. Financial stocks constitute 28.68% of the holdings followed by services (14.10%) and technology stocks (13.90%) companies. According to Edgar Online, JPMorgan increased its ownership of 1673 stocks, while opening 210 new positions in the last quarter. I have examined the boldest 7 buys from a fundamental perspective, adding my O-Metrix Grading System where possible.

Company Name

Ticker

Shares Held

% Change

% of TSO*

O-Metrix Score

Covedien PLC

COV

17.01 million

NEW!!!

3.45%

5.62

Schlumberger

SLB

20.85 million

41.70%

1.55%

6.66

Johnson & J.

JNJ

23.31 million

32.58%

0.85%

3.56

St. Jude Med.

STJ

9.28 million

1485%

2.82%

5.32

Becton

BDX

6.95 million

200%

3.2%

4.66

LAM Research

LRCX

14.68 million

92.03%

11.86%

6.78

General Motors

GM

28.63 million

61.60%

1.91%

14.95

*TSO: Total share ownership by the JPMorgan Chase funds

Data obtained from Finviz and Morningstar and is current as of Aug.19

Covedien PLC, a favorite of Jim Cramer, and is also favored by JPMorgan Chase. JPMorgan initiated a new purchase and owns 17 million shares. Total share ownership stands at 3.45%. As of Aug 19, Covedien shows a trailing P/E ratio of 13.17, and a forward P/E ratio of 11.15. Analysts estimate 12% annual EPS growth for the next five years. It paid 1.67% dividend last year, while the profit margin was 16.7%.

Covidien had an EPS growth of 52.35% this quarter, and 66.25% this year. It is trading 16.73% lower than its 52-week high. Analysts' mean target price of $61 indicates a 27% upside potential. The company has a five-star rating from Morningstar. Debts have been decreasing for the last four quarters. Debt-to equity is 0.4, below the industry average of 0.6.

This stock is a compelling long-term profit-maker. It’s O-Metrix score is 5.62.

Schlumberger shares literally collapsed from $95 to $73 in the recent storm. JPMorgan owns 20.85 million shares and increased its holdings by 41.705% in the last quarter. Total share ownership stands at 1.55%. As of Aug 19, Schlumberger shows a trailing P/E ratio of 18, and a forward P/E ratio of 13.39.

Analysts estimate 20% EPS growth for the next five years. The stock is trading 23% below its 52 week high. The company does not have any debt issues. Current ratio is 1.61 whereas the long-term debt to equity ratio is 0.18. With a yield of 1.37%, Schlumberger has an O-Metrix score of 6.66.

Johnson & Johnson is among the top dividend stocks in the market. The company offers a nifty yield of 3.61%. JPMorgan Chase owns 23.31 million shares and increased its ownership by 32.58% in the last quarter. Total share ownership stands at 0.85%.

As of Aug 19, the stock is trading with a trailing P/E ratio of 15.11 and a lower forward P/E ratio of 11.96. Analysts estimate 6.08% EPS growth for the next 5 years, which is easily attainable given the 7.35% EPS growth of the past 5 years. Based on these indicators JNJ has an O-Metrix score of 3.56.

St. Jude Medical is a developer, manufacturer, and distributer of medical devices worldwide. The stock lost almost 17% in the last month. JPMorgan Chase owns 9.28 million shares and increased its holdings by 1485% in the last quarter. Total share ownership stands at 2.82%.

As of Aug 19, the stock is trading with a trailing P/E ratio of 15.35 and a lower forward P/E ratio of 11.3. Analysts estimate 12.13% EPS growth for the next 5 years, which is conservative given the 21.48% EPS growth of the past 5 years. Its current ratio is 3.34 and it offers a yield of 2.04%. The company has an O-Metrix score of 5.32.

Becton & Dickinson is another medical technology company, producing medical devices, as well as instrument systems worldwide. Similar to St. Jude Medical, the stock collapsed during the recent sell-off and lost 13.54% in the last month. JPMorgan Chase owns 6.95 million shares and increased its holdings by 200% in the last quarter. Total share ownership stands at 3.2%.

As of Aug 19, the stock is trading with a trailing P/E ratio of 14.04 and a lower forward P/E ratio of 12.33. Analysts estimate 10% EPS growth for the next 5 years, which is easily attainable given the 12.38% EPS growth of the past 5 years. Its current ratio is 3.06, and it offers a yield of 2.13%. The company has an O-Metrix score of 4.66.

LAM Research is a semiconductor equipment designer, producer, and marketer, head-quartered in Fremont, California. JPMorgan Chase owns 14.68 million shares and increased its holdings by 92.03% in the last quarter. Total share ownership stands at 11.86%. It is a highly profitable company with a gross margin of 46.24%, and net margin of 22.5%. In the past 5 years, annualized EPS growth was 19.95%.

While the company is doing really well, the stock has been heading south for a while. It lost 30.49% since January. As of Aug 19, the stock was trading with a low trailing P/E ratio of 6.22 and a forward P/E ratio of 8.53%. Analysts estimate 10% EPS growth for the next 5 years. Based on this estimate LAM Research has an O-Metrix score of 6.78.

General Motors is in a strong recovery since its emergence from bankruptcy. It is one of the most popular stocks among institutions. Top 10 institutions significantly increased their GM holdings in the last quarter. JPMorgan Chase owns 28.63 million shares and increased its holdings by 61.60% in the last quarter. Total share ownership stands at 1.91%. While the company is doing well, the stock has been heading south for a while. GM shares lost almost 40% since January.

Unlike financial stocks, GM’s balance sheet does not have significant red flags. Its current ratio of 1.23 and debt-to-equity ratio of 0.29 are much better than financial stocks. P/S, P/B, P/C values are 0.23, 0.81, and 1.01, respectively. As of Aug 19, the stock is trading with a low P/E ratio of 3.5, and a forward P/E ratio of 4.55.

Analysts estimate an EPS growth of 11.6% for the next 5 years. Based on these estimations GM has an O-Metrix score of 14.5. Automotive sales are highly correlated with consumer confidence. I think GM is a good play, if you believe in strong economic recovery.

Find more information on O-Metrix Grading System here.

Source: 7 Big Buys By JPMorgan Chase