As I watched Wall Street: Money Never Sleeps last weekend, I thought I was looking at a documentary. In one scene, a Wall Street bank bails out a weaker competitor for around the price of its headquarters.
Those are the kinds of deals JPMorgan Chase
When Bear Stearns faltered in March of 2008, JPMorgan Chase swept in and ended up paying $10 a share -- about a 90% discount from Bear's stock price just a month before. Yes, that was in the neighborhood of the value of Bear's headquarters.
The difference between the movie and real life is that the terms were sweeter in real life. JPMorgan Chase also got a nice loan and a backstop from the government on the Bear purchase.
A few months later, JPMorgan Chase was shopping again, beating out Citigroup
What this all means is that JPMorgan Chase, which already had more than $1.5 trillion in assets at the end of 2007, grew by 40% in a year of the-financial-world-is-going-to-end prices. Yet even after a recovery from the depths, its share price and market capitalization are pretty much the same as they were at the close of 2007.
That is the reason JPMorgan Chase may be an opportunity.
Bank of America
And I haven't bought any of them yet
I haven't pulled the trigger on any of these companies -- except for some pre-crisis, long-held shares of Citigroup. In contrast, I bought up shares of Berkshire Hathaway
The difference? Berkshire Hathaway is as transparent as a $200 billion conglomerate can be. Even after going through the financial-reform process, the big banks have balance sheets that can hide many financial shenanigans. Lehman Brothers' antics, for example, offer just a taste of what can lurk beneath the surface.
My preference has been to look for great deals on smaller banks that were opportunistic during the financial crisis. Want an example? My colleague Matt Koppenheffer details an opportunity he likes.