Eye on Insiders: JPMorgan Chase

Watching insiders is like participating in a weeks-long stakeout. You expect something to happen, but you don't know what. So you settle in, sip your coffee, and wait for clues to solving the big case.

Here, the "case" is direction: Which way is your stock headed? The "clues" come in the form of insider buying and selling action. Have a look at JPMorgan Chase (NYSE: JPM  ) over the past year.

Insider Rating

Bearish
Stock trading near an all-time high. Most purchases made at prices well below what the stock trades for currently.

Business Description

One of the nation's largest banks, and arguably the best positioned after it acquired valuable assets at depressed prices during last year's meltdown.

Recent Price

$46.47

CAPS Stars (Out of 5)

**

Percentage of Shares Owned by Insiders

0.60%

Net Buying (Selling)*

$21.3 mil., including $10.5 mil. in preferred stock

Last Buyer (% Increase)

David Novak, director
1,000 shares at $33.21 apiece on June 25
(Purchase bolstered direct holdings by 1%)

Last Seller (% Decrease)

James Staley, Managing Director
37,000 shares at $32.92 apiece on April 17
(Sale represented 7% of direct holdings)

Competitors

Bank of America (NYSE: BAC  )
Citigroup (NYSE: C  )
Barclays (NYSE: BCS  )

CAPS Members Bullish on JPM Also Bullish on

General Electric (NYSE: GE  )

CAPS Members Bearish on JPM Also Bearish on

Goldman Sachs (NYSE: GS  )

Recent Foolish Coverage of JPM

Buffett and Bogle Bash Wall Street

How Bad Are These Bank Failures

Lehman Brothers and the Age of Stupidity

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Sept. 22.)
*Open market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: bearish
Last year at this time, we were wondering if any bank would survive. Now, all we can do is marvel at how well JPMorgan Chase and several of its peers have returned from what seemed like financial abyss.

But most of these financial stocks are speculative plays. We know, for example, that AIG (NYSE: AIG  ) isn't worth a third more today than it was on Friday. Such short-term moves are emblematic of nothing other than greed, and perhaps stupidity.

JPMorgan Chase, on the other hand, is better positioned than most thanks to assets it acquired on the cheap from Washington Mutual. Insiders -- especially CEO Jamie Dimon -- bet big on their company's stock as others sold. Today, Dimon and Executive Vice President Heidi Miller are basically sitting on a double.

But I'm guessing their next move is a sale. My Foolish colleague and bank expert Morgan Housel is equally cautious when it comes to this stock:

No one doubts that JPMorgan is the strongest of the big banks. But, come on, shares are only 15% off the all-time high. However anecdotal that might be, it seems sketchy in light of the current economy. Sure, synergies from Washington Mutual and Bear Stearns could add a pretty penny to its bottom line, but the degree they will is still far from certain.

Do you agree? Disagree? Log into CAPS today and tell us how you would rate JPMorgan Chase.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comments box below. I'll write this column as often as you, our readers, demand.

Get more of the inside scoop with related Foolishness:

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has its eye on you.


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