Is JPMorgan Chase a Safe Investment?

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With shares of JPMorgan Chase & Co. (NYSE:JPM) trading around $58, is JPM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

JPMorgan Chase is a financial holding company that provides various financial services worldwide. The company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management, and private equity. Financial services companies like JPMorgan Chase are essential for well-functioning economies around the world.

In the past year, regulators turned their attention to the large financial institutions that dominate the business of physical commodities trading. With new rules penned by Congress limiting the degree to which banks can trade for their own accounts and an ongoing investigation from the Commodity Futures Trading Commission, JPMorgan Chase has decided it is time to get out of the physical commodities trading business. After pursuing a buyer for months, the company finally announced Wednesday morning that Mercuria Energy Group, a fast-growing Swiss trading firm, had agreed to purchase the unit for $3.5 billion in cash. Mercuria, founded by former Goldman Sachs (NYSE:GS) traders, has grown into one of the world’s four largest independent commodities traders, with offices in 28 countries and more than 1,000 employees. Subject to regulatory approval, the all-cash transaction is expected to close in the third-quarter of this year.

“Our goal from the outset was to find a buyer that was interested in preserving the value of JPMorgan’s physical business,” Blythe Masters, head of JPMorgan’s global commodities business, said in the Wednesday press release announcing the sale. “Mercuria is a global leader in the commodities markets and an excellent long-term home for these businesses.” What the statement did not explain is whether Masters, a long time veteran of the bank, would leave JPMorgan to remain with her team.

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