Dimon is too classy to make comments like those of former Citi CEO Chuck Prince (think back to the now infamous line, “As long as the music is playing, you’ve got to get up and dance. We’re still dancing.”) And in general, Dimon was a little less reckless than his peers in the years leading up to the 2008-09 meltdown. His relative prudence put JPM in a better position than its rivals once the capital markets returned to normal.
Paying him $20 million in a year at a time when jobs are getting cut and bankers make convenient political punching bags is a mistake, but it’s one that is easy enough to fix.
Dimon should step down, and JPMorgan should replace him with someone untainted by the bank’s recent scandals.
Given JPM’s reduced risk profile–and given that the credit crisis has long since passed — the bank no longer needs a rock-star CEO with an outsized salary.
Is JPM Stock Worth Buying?
Despite my view that the bank is doomed to slow growth for the foreseeable future, I’m actually pretty bullish on JPM stock at current prices.
JPM trades at 1 times book value and 1.4 times tangible book value, which excludes goodwill. Before the crisis, JPM traded at more than 3 times its tangible book value.
Of course, back in 2006, JPM operated in a looser regulatory environment and had far fewer constraints on its business. JPM should trade at a discount to its historical given the less attractive prospects facing the industry today.
That said, at 1.4 times tangible book, you have a wide margin of safety. If JPM’s valuation were to rise to a very reasonable 2 times tangible book, stockholders would enjoy a nice 43% return, not including dividends. And JPM pays a respectable 3% dividend at current prices.
My recommendation? Buy JPM stock on dips.
Earnings growth will be nothing to get excited about this year, sure. But while Jamie Dimon is likelier than not to maintain control for now, regulations are whittling away at the number of blowups that could occur under his watch.
And at current prices, there is substantial upside and very little in the way of risk.
Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. As of this writing, he did not hold a position in any of the aforementioned securities. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays.