Vltava Fund: “JP Morgan (JPM) is the Strongest, Largest, and Most Profitable Bank in the World”

·4 min read

Vltava Fund, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. In its Q3 investor letter, Vltava Fund mentioned the two companies they recently owned and provided some updates about the fund's assets as of the end of the recent quarter. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

In the Q3 2021 investor letter of Vltava Fund, the management firm mentioned JPMorgan Chase & Co. (NYSE: JPM) and discussed its stance on the firm. JPMorgan Chase & Co. is a New York, New York-based investment banking company with a $503.9 billion market capitalization. JPM delivered a 31.61% return since the beginning of the year, while its 12-month returns are up by 67.69%. The stock closed at $168.66 per share on October 5, 2021.

Here is what Vltava Fund has to say about JPMorgan Chase & Co. in its Q3 2021 investor letter:

"While all the previous names could be categorised as founder, continuing, or key shareholders, these last two names fall into the category of hired professional managers. This is actually the most numerous category among the bosses of large companies, but even among them there exist a number of individuals with exceptional long-term track records. In our view, these include also Jamie Dimon and Herman Gref.

We consider JP Morgan to be the strongest, largest, and most profitable bank in the world. It has not always been so, and the fact that it is what it is today can be attributed especially to its CEO Jamie Dimon. Dimon has spent his entire career in banking. He came to JP Morgan in a roundabout way in 2004 after the bank bought Bank One, of which he was CEO at the time. Since early 2006, Dimon has been CEO of the entire JP Morgan.

The quality and strength of JP Morgan under his leadership became fully apparent for the first time in 2008. Not only did JP Morgan help to stabilise the market by taking over the failing Bear Stearns in the spring of that year, but it was the only major US bank that did not require government assistance throughout the Great Financial Crisis and that was highly profitable even in the difficult year of 2008. Today, JP Morgan is even bigger, even more profitable, and even stronger than ever before. Many investors view banks with disdain, but a good bank with good management can be a very good long-term investment. From the time of its merger with Bank One in 2004 through the end of 2020, JP Morgan’s stock has outperformed even the S&P 500 index. The bank has earned a total net profit of USD 330 billion during this period, of which USD 232 billion has been paid out to shareholders in dividends and in share buybacks. I can recommend two books about Jamie Dimon: The House of Dimon and Last Man Standing."

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Based on our calculations, JPMorgan Chase & Co. (NYSE: JPM) ranks 16th in our list of the 30 Most Popular Stocks Among Hedge Funds. JPM was in 108 hedge fund portfolios at the end of the first half of 2021, compared to 111 funds in the previous quarter. JPMorgan Chase & Co. (NYSE: JPM) delivered a 9.15% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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Disclosure: None. This article is originally published at Insider Monkey.

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