BAC

Key Comments from the Banks This Earnings Season

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Image Source: TradingView By Valuentum Analysts JPMorgan’s (JPM) CEO Jamie Dimon: The Firm concluded the year with a strong fourth quarter, generating net income of $14.7 billion excluding a significant item. Each line of business performed well. In the CIB, revenue rose 10%. Markets continued to benefit from demand for financing and robust client activity, pushing revenue up 17%. Additionally, Payments revenue reached a record $5.1 billion due to ongoing deposit and fee growth. In CCB, revenue rose 6%, and the franchise continued to acquire new customers at a robust pace. This year, we opened 1.7 million net new checking accounts and 10.4 million new credit card accounts, and we also grew wealth management households to over 3 million. Looking … Read more

Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Key Comments from the Banks This Earnings Season

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Image: The big banks have done well recently. By Valuentum Analysts JP Morgan’s (JPM) CEO Jamie Dimon: “The Firm reported strong underlying business and financial results in the first quarter, producing net income of $14.6 billion.” “In the CIB, Investment Banking fees rose 12% in the first quarter, although clients have become more cautious amid an increase in market volatility driven by geopolitical and trade-related tensions. Meanwhile, we saw increased activity in the Markets business. Markets revenue rose to $9.7 billion, an exceptionally strong quarter with record revenue in Equities. In CCB, the franchise continued to acquire new customers at a robust pace, opening 500,000 net new checking accounts and adding record first-time investors in wealth management. Finally, AWM had … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Berkshire Hathaway’s Operating Earnings, Free Cash Flow Fall in Third Quarter

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Image: Berkshire Hathaway has reduced its stake in Apple and Bank of America. By Brian Nelson, CFA Berkshire Hathaway (BRK.A) (BRK.B) reported third quarter results November 2. Revenue edged down modestly on a year-over-year basis in the quarter, to $93 billion, while net earnings attributable to Berkshire Hathaway shareholders came in at $26.3 billion, up from a loss in the year-ago period as after-tax investment gains of $16.2 billion powered the improved performance. Image: Investment gains powered Berkshire’s third quarter results. After-tax operating earnings in the quarter, however, fell to $10.1 billion from $10.8 billion in the third quarter of 2023. Insurance underwriting experienced the biggest decline, with after-tax operating earnings dropping to $750 million from $2.4 billion in the … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more

JPMorgan Chase’s Return on Capital Shines in Second Quarter

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Image Source: Hakan Dahlstrom By Brian Nelson, CFA On July 12, JPMorgan Chase (JPM) reported second quarter results that beat expectations on the top line, but came up a bit short on the bottom line. Managed net revenue came in at $51.0 billion, up 20%, while the company’s provision for credit losses swelled to $3.05 billion. Net income was $18.15 billion in the quarter, resulting in earnings per share of $6.12. Net income excluding significant items of $13.1 billion was $4.40 per share. Return on common equity was 23% in the quarter, while return on common equity was 28%. CEO Jamie Dimon’s commentary on the quarter is found below: The Firm performed well in the second quarter, generating net income of … Read more

Berkshire Hathaway Caps Off Strong Year of Operating Earnings Growth

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Image: Berkshire’s operating earnings experienced a strong advance during 2023 from last year’s levels. By Brian Nelson, CFA On February 24, Berkshire Hathaway (BRK) reported strong fourth-quarter results that capped off a year where operating earnings advanced 21% on a year-over-year basis. Warren Buffett tipped his hat to his long-time partner Charlie Munger, who passed away in November of last year, crediting him as the architect of Berkshire and himself merely in charge of the “construction crew.” There weren’t many surprises in the annual report, and Buffett made several references to areas that he has long talked about in the past, including pointing investors to operating earnings, as opposed to net income, which includes unrealized capital gains that can make … Read more