JP Morgan (JPM)
Following comparatively stellar performance throughout the financial crisis, Jamie Dimon and JP Morgan have suffered their share of setbacks in recent years. Numerous regulatory initiatives as well as self-inflicted crises have limited the stock's upside during a period that might otherwise be viewed as a buying opportunity. It is true that the outlook for industry growth in revenue and earnings is somewhat subdued relative to history. However, there are also many factors working in the industry's favor, such as a stabilized housing market, continue decreases in credit losses and foreclosure-related expenses, falling unemployment, the resolution of regulatory uncertainties, fortified balance sheets, higher interest rates, and improved loan demand.
These positive developments in the years to come do not seem to be incorporated into some bank-stock valuations. That said, there are still some potential landmines to navigate. Over time, we believe the industry will succeed in rebuilding its credibility with a hurting investor base. At slightly over 1.4x tangible book value and less than 9.5x the consensus for 2014, we think the stock makes sense for long-term investors seeking exposure to a recovering industry through a well-managed, high-quality bank.