Buy JPMorgan’s December 45 Calls [JPMLI.X], he says, bullishly

Discussion in 'Options' started by Jahajee, Sep 28, 2008.

  1. Bull Amongst the Bears: JPMorgan Offers Ray of Hope
    by: Andrew Snyder posted on: September 28, 2008 | about stocks: JPM Font Size: PrintEmail It is hard to be bullish when the nation’s, or the world’s economy, is on the brink of a major slowdown. It is even harder to be positive when Washington is making such dumb, selfish moves like it has over the past 24 hours.

    But when I see a company making progress through good old-fashioned fundamental growth, revealing a ray of capitalistic hope to the market, I cannot hold back my bullish notions.

    Overnight, JPMorgan Chase (JPM) put the final touches on its purchase of Washington Mutual’s (WM) banking operations. It is proof America’s capitalist system is still working.

    What was the largest bank failure in the nation’s history has turned into a positive earnings opportunity for JPMorgan, which is now the largest depository in the country with over $900 billion in customer deposits.

    It is a bold move for JPMorgan, but will ultimately be a very powerful one. First, the company gets the great benefit of the huge deposits made by its customers. With the financial world in desperate need of liquidity, those deposits will give their new owner a lot of options.

    Shareholders should like the $1.9 billion purchase, as it will have an almost immediate positive impact on JPMorgan’s bottom line. The deal is expected to increase earnings next year by at least $0.50 per share, about one-sixth of last year’s per-share earnings.

    Finally, thanks to the management team’s decision (truly a no-brainer) to cut $34 billion in estimated valuations from Washington Mutual’s former debt portfolio, JPMorgan will be able to skate through the current financial fiasco with much less volatility. Instead of surprising the market with significant write-downs later on, it is doing it now when it will not spook investors and drive share price through the floor.

    A bull amongst the bears

    Wall Street is sitting on its hands today, waiting for word from Washington, but JPMorgan has been able to stay in positive territory most of the morning. It is a sign of things to come.

    Investors looking to find a ray of capitalistic hope in the nation’s financial meltdown should take a serious look at JPMorgan. There is some risk involved in the play, but the rewards certainly have the upper hand.

    My official recommendation will make options investors quite happy. Buy JPMorgan’s December 45 Calls [JPMLI.X]. The value of the position will soar as this mess resolves itself.

    If a company can increase its fundamental values during a crisis like this, its strength is obvious. Invest in the company now and profit as it helps pull the nation out of this mess.

    Thanks to an array of purchases at incredible discounts, JPMorgan is going to be one of the fastest-rebounding banks in the industry.

    Disclosure: None.