We recently published a list of 7 Most Profitable Cheap Stocks To Invest In. In this article, we are going to take a look at where JPMorgan Chase (NYSE:JPM) stands against the other most profitable cheap stocks to invest in.

Insights on Small Caps, Tech, and More

Sherry Paul, Morgan Stanley Private Wealth Management managing director, joined CNBC’s “Squawk Box” on October 8, to discuss her investment strategy amidst the current market trends. Despite the Russell 2000 being down a percent, Paul believes it’s the right time to strategically add to small caps, as they are ripe for M&A and have been teased out due to their dependence on domestic consumption.

Paul emphasizes that the key to navigating this market is to be selective and strategic, recommending a broadening out of investments across sectors in the S&P, with a focus on large caps, particularly in areas such as industrials, financials, and staples. She believes that the rates going lower, combined with the productivity-enhancing cost reduction kicker, will benefit these sectors. Paul also highlights the importance of dividend yields, which can add lower volatility to a portfolio.

Regarding large-cap tech stocks, Paul remains bullish, viewing it as a theme rather than an idea. She believes that corporations will invest in software and hardware upgrades, driven by their enormous cash balances and the need to cut costs as rates go lower. This will be a boost for the sector, although it’s a longer-term game, with a time horizon of 12-24 months.

Despite the S&P 500 near record levels, Tom Lee, co-founder of Fundstrat, an independent equity research firm, remains bullish, citing a strong economic backdrop, the Fed’s decision to cut rates, and stimulus policies in China as tailwinds that will support the market. He believes that the economy is resilient and that the Fed’s easing will lead to a continued bull market, with the S&P 500 potentially reaching 5700 or higher by the end of the year.

Lee acknowledges that there are some headwinds, including the looming election and rising oil prices, but believes that they will be offset by the tailwinds. He also notes that small caps, which have been the weakest area of the market since the Fed hike, are due for a rebound.

As the market continues to navigate through economic trends and global challenges, expert insights help provide valuable insights to make informed investment decisions.

Our Methodology

To compile our list of the 7 most profitable cheap stocks to invest in, we used the Finviz and Yahoo stock screeners to compile an initial list of the 40 largest companies by market cap that are trading at a forward P/E ratio of under 20 as of October 7. From that list, we narrowed our choices to 7 stocks with positive TTM net income and 5-year net income growth informed by reputable sources, including SeekingAlpha, which provided insights into 5-year growth rates, and Macrotrends, which supplied information on trailing twelve-month (TTM) net income. Then we sorted the stocks in ascending order, according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A group of business people discussing plans around a boardroom table adorned with a financial services company logo.

JPMorgan Chase (NYSE:JPM)  

Number of Hedge Fund Holders: 111  

Forward P/E Ratio as of October 7: 11.93  

TTM Net Income: $52.21 Billion  

5-Year Net Income CAGR: 9.53%

JPMorgan Chase (NYSE:JPM) is a multinational bank and financial services company that has been a leader in the industry for over 200 years. JPMorgan Chase (NYSE:JPM) largest U.S. bank by assets and operates in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management to millions of customers in the US, and many of the world’s most prominent corporate, institutional and government clients globally. As of June 30, JPMorgan Chase (NYSE:JPM) had $4.1 trillion in assets and $341 billion in stockholders’

The bank has had a strong performance, driven by high net interest income and a favorable interest rate environment. However, as the Fed cut interest rates, a lower net interest income could affect the bank’s future earnings performance. Despite this JPMorgan Chase’s (NYSE:JPM) unique diversified business model, strong non-lending operations, and strategic investments position it well for success even in a lower interest rate environment. Lower interest rates could benefit the bank through reduced loan charge-offs and strong performance in non-lending operations, such as trading and investment banking, driving stronger revenue and net income growth.

In 2023, JPMorgan Chase (NYSE:JPM) acquired the majority of assets and assumed the deposits and liabilities of First Republic Bank from the Federal Deposit Insurance Corporation (FDIC). This acquisition helped the bank to achieve an additional $500 million in net income per year. This increase in earnings was driven by the acquisition of First Republic Bank’s assets, which include approximately $173 billion of loans and $30 billion of securities. This helped the bank expand its loan portfolio and provide a new source of revenue.

The acquisition of First Republic Bank will also help JPMorgan Chase (NYSE:JPM) advance its wealth strategy. First Republic Bank has built a strong reputation for serving clients with integrity and exceptional service, and JPMorgan Chase (NYSE:JPM) plans to leverage this expertise to further expand its own wealth management capabilities. By combining the two companies’ strengths, JPMorgan Chase (NYSE:JPM) will be able to offer a more comprehensive range of services to its clients, enhancing its position in the wealth management market.

JPMorgan Chase (NYSE:JPM) has been a popular choice among hedge funds, with a total of 111 hedge fund holders holding $6.97 worth of stocks in the company. The company is expected to report a 20.35% increase in earnings for the current year. For the twelve months ending June 30, JPMorgan Chase’s (NYSE:JPM) net income was $52.21 billion, a 13.38% increase year-over-year and a CAGR of 9.53% over the last 5 years.

Overall JPM ranks 1st on our list of most profitable cheap stocks to invest in. While we acknowledge the potential of JPM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than JPM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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