m100 Banks on Morgan

10/09/2002 12:00 am EST


Ken Kam

CEO, Marketocracy, Inc.

The m100–the top performing managers among the thousands participating in the virtual portfolios monitored by Marketocracy–have taken what they consider to be a risky position in J.P. Morgan, according to the online service’s president and founder, Ken Kam. The following advice comes from the m100 Journal, which each week, monitors the top buys and sells among the m100.

J.P. Morgan (JPM NYSE) has been in the headlines quite a bit recently, but for all of the wrong reasons. The financial giant has seen its share price slide over 52% this year as its earnings have been hit hard by exposure to the Enron and WorldCom blowups, among others. And the company is not out of the woods yet, announcing that they will fall well short of earnings expectations due to falling trading revenue and a sharp spike in problem loans in the telecom and cable industries.

So what could the m100 possibly like about this stock? For one, shares have fallen down to meet the criteria of value investors. Right now, JPM trades at a book value below one, demonstrating that the market is pricing the company with no expectations of future revenue growth. A second attractive characteristic for shares of JPM is the hefty 7% dividend yield currently offered. m100 members are willing to buy the beaten up shares and collect the dividend income, making it easier to wait out a recovery in share price.

J.P. Morgan has a tough road ahead of themselves. A number of things have to happen to turn the company's fortunes around, and shares are likely to continue facing selling pressure due to Brazilian default concerns, continued Enron investigations, and a general market malaise. But the m100, who purchased shares this week at an average price of $17.89, is willing to take on some of that risk for deep discount in share price.”

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