Now that there are only a few weeks left in 2012, this is a good time for investors to look at the stocks they own and evaluate whether their performance has met previously set expectations. While year-to-date returns are obviously something investors will look at, big structural changes to the company, negative news stories, and an understanding of how your holding compares with its peers are all important points to consider at the end of the year and will help you determine whether the company deserves to remain a part of your portfolio.
So today let's examine how 2012 treated JPMorgan Chase (NYSE:JPM).
Year to date, JPMorgan's stock price has risen an astonishing 28%, while over that same timeframe the Dow Jones Industrial Average (DJINDICES:^DJI) is up a mere 7.67%. The stock price's 52-week range is $30.42 to $46.49, and with the stock currently at $42.56, it's trading at the higher end of that one-year rolling range. Even still, the price-to-earnings ratio is only 9.03, which is much lower than the current P/E ratio of 15.87 for the S&P 500 (SNPINDEX:^GSPC).
JPMorgan also raised its dividend this year by 20%, after it passed the regulators' stress test with flying colors. At the same time it announced the dividend increase, the company informed shareholders that it had the authority to buy back up to $15 billion worth of stock. But in May, after some trading issues in London (more on this later), the company cut the buyback program until further notice, which happened to come in November, when the company announced that it would repurchase as much as $3 billion worth of stock in the first quarter of 2013.
I know most shareholders would still argue that the company's management could have done more to return value, but in 2012 JPMorgan undoubtedly had great intentions to give back to shareholders. The London Whale just got in the way.
Whale of a problem
On May 10, JPMorgan CEO Jamie Dimon blamed "errors, sloppiness, and bad judgment" for what at the time amounted to $2 billion of trading loses -- and with that. the London Whale crisis had begun. Bruno Isksil, known as the "London Whale," had made a huge wager on complex credit derivatives from JPMorgan's London office. Just weeks after the May 10 disclosure, a number of top London employees had left the company, Jamie Dimon was seen sitting in front of Congress discussing how the incident occurred, and trading losses were being estimated as high as $9 billion.
This trading loss will continue to plague investors moving forward because of a number of issues that have arisen. Shortly after the May 10 announcement, investors filed lawsuits against the bank's management team. More recently, the bank filed suit against a former executive who supervised the Whale. And just days ago, reports broke indicating that a U.S. Senate investigations subcommittee is still looking into the whole situation.
So the crisis isn't totally behind the company yet. The bank has taken a $5.8 billion loss, a number of employees no longer work at the firm, and investors' confidence of the greatest risk assessor in the business, Jamie Dimon, has been shaken. Simply judging from the share price, investors weren't really hurt by Whale issue, but had the company not taken a nearly $6 billion loss, investors would surely be better off than they are now.
Investors certainly had a hard time finding a better bank than JPMorgan Chase this year. While its year-to-date share price is up 28%, as I mentioned, fellow Dow bank Bank of America (NYSE:BAC) has seen its stock rise 91.28% during that same timeframe -- but Bank of America also doesn't have as large of a dividend yield (currently only 0.4%), and its 28.74 P/E ratio is more than triple JPMorgan's. While another big U.S. bank, Citigroup (NYSE:C) compares slightly better with JPMorgan on a P/E ratio, its 0.1% dividend yield isn't even in the same ZIP code. The only bank that can compete is Wells Fargo (NYSE:WFC), which has a P/E of 10.45 and a yield of 2.6%, but the year-to-date share price has increased by only 18.8%.
Fool contributor Matt Thalman owns shares of Citigroup, Bank of America, and JPMorgan Chase. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Motley Fool newsletter services recommend Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.