Over the weekend, Barron's published its weekly recommendation of stocks to buy right now. Their top choice was JPMorgan Chase & Co. (NYSE: JPM), a multinational investment bank based in Manhattan.
The publication called JPMorgan the top-run bank in the United States thanks to the leadership of CEO Jamie Dimon. They also explained why Warren Buffett is a strong advocate of the bank and how, despite slowing growth and falling interest rates, JPMorgan is an economic powerhouse poised to prosper over the coming decade and beyond.
Of course, you don't need Barron's to help you predict breakout businesses.
Instead, you can use the Money Morning Stock VQScore™ system to find the best stocks to buy now.
In fact, the VQScore identified JPMorgan as a breakout candidate long before the Barron's article - in December 2018 when the stock was trading for just $92.
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Why JPMorgan Stock Is a "Buy"
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Barron's placed the bulk of its bullish call on the back of Jamie Dimon, who took over the financial institution in 2006.
Having navigated the bank through the financial crisis, Dimon established himself as a bit of a Washington foe when the Treasury Department authorized bailouts for the U.S. financial sector.
In 2009, the bank was the healthiest of the large banks to receive funds and did not require TARP funds due to its limited exposure to mortgage-backed derivatives.
One of the many reasons why investors love JPMorgan is that Dimon has a lot of personal interest in the bank. He is the second-largest individual holder of JPM stock, having amassed a stake of 8.9 million shares in 2018, according to the most recent SEC filing.
Dimon, 63, is expected to stay on at the helm through 2023 and could extend his contract beyond that deadline.
The firm has become a solid defensive bet as the U.S. economy faces new headwinds and the prospect of an interest rate cut by the Federal Reserve. The article notes that the Wall Street bank reached a net income of $32.5 billion, topping every U.S. company with the exception of Apple Inc. (NASDAQ: AAPL).
Even with the prospect of a recession on the horizon, JPMorgan is one of Warren Buffett's favorite stocks. His firm Berkshire Hathaway Inc. (NYSE: BRK.A) has amassed a more than $6 billion stake in JPM over the last three quarters.
Buffett notes that if the bank traded at the level he believes it is valued (three times book earnings), shares would climb above $170, a figure that represents upside of 53% from Monday's closing price.
Currently, JPM stock trades at just 11 times forward earnings of $10 per share. That figure is a huge discount to the average S&P 500 stock, which trades at 17 times earnings. This simple discount is one reason why Warren Buffett has said that the stock should be trading at 53% higher than its current value.
Of course, the most important number behind JPMorgan's pending breakout is its VQScore. The Money Morning Stock VQScore™ tracks more than 1,500 profitable companies and assigns each of them one simple number - the higher the better.
This score takes the most useful valuation strategies available and boils them down to a figure that tells you when to buy, sell, or hold a stock.
Specifically, the VQScore formula values a stock's earnings power and whether EPS is accelerating or decelerating. Then, it compares that to the momentum of recent demand for the company's shares and whether that's increasing or decreasing.
With a VQScore of 4.45, JPMorgan is right in our "Strong Buy Zone" and is poised for a breakout in the second half of 2019.
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