How Jamie Dimon Turned Crises Into 170% Gains

Alexander Green
by Alexander Green, Chief Investment Strategist, The Oxford Club
jamie dimon 0

We’ve all seen it before...

A company announces an earnings miss... a product recall... a reduced profit forecast - and the shares plummet.

Should you step up and buy? The best answer is “not immediately.”

It takes financial institutions - mutual funds, hedge funds, endowments, pensions, etc. - weeks to accumulate a position... and weeks to unwind one.

So bad news is often followed by several days of institutional selling that put pressure on a stock. That’s why it’s prudent to wait to buy it, if - indeed - you should purchase it at all.

However, there is one glaring exception to this rule: when the insiders load up on the stock themselves.

Corporate executives and board members have an unfair advantage when they trade their own companies’ shares. They have access to material, nonpublic information about the future prospects of the business.

That’s why the federal government requires insiders to immediately file a Form 4 with the SEC, detailing how many shares they bought on what date and at what price.

So while you cannot know everything the insiders know, you can at least know what they’re doing. And this is valuable intelligence indeed.

JPMorgan Chase CEO Jamie Dimon is a fine example.

Over the past eight years, he has been a sporadic buyer of his company’s stock. And his timing has been little short of clairvoyant.

At each point, he stepped up to buy when the market was punishing the stock.

For example, he bought a half-million shares in January 2009, when the financial crisis was in full swing and bank stocks were getting brutalized.

His timing wasn’t perfect. (It would be two more months before the market hit rock bottom.) But it was damn good, with shares bought as low as $22.93.

In July 2012, he bought another half-million shares, right after the stock got hammered by the London Whale trading debacle that resulted in a $6 billion loss for the bank.

And he purchased a half-million shares again in January 2016, after markets tumbled on the oil price meltdown and fears that China’s economy was coming in for a hard landing.

In all, Dimon spent $55 million to buy shares between $22.93 and $53.18. Was that a good signal for the rest of us?

I’d say. Today those shares are worth about $147 million, a gain of around 170%.

And JPMorgan just increased its quarterly dividend from $0.50 to $0.56. That means Dimon will earn $3.4 million in dividend payments over the next four quarters from those open-market purchases alone.

Think about it. Millions of dollars in dividend payments. Many tens of millions more in capital gains. This is how the rich get richer.

You aren’t going to beat ‘em. So you might as well join ‘em...

Dimon’s trades were huge, demonstrating a strong conviction that JPMorgan’s shares were undervalued.

His wildly successful track record showed that his timing and instincts were shrewd.

And this was all public information.

True, insiders aren’t infallible. But no one is more knowledgeable than corporate officers and directors about the right time and price to buy their own companies’ shares.

As Dimon’s trades clearly demonstrate, there are fortunes to be made riding the coattails of knowledgeable insiders.

If you’re not doing it already, the only question is “Why not?”

Good investing,

Alex

Thoughts on this article? Leave a comment below.

Editor’s Note: Alex has had so much success tracking insider buying that he created a whole research service about it. Check out The Insider Alert here.

An Insider Buying Bonanza in This Stock

Alex’s Insider Alert service rides the momentum of massive insider buying - the kind that Jamie Dimon has done since the financial crisis.

Gladstone Commercial (Nasdaq: GOOD) is a perfect example of a stock that has shot up due to insider activity. Here’s Alex checking on the REIT earlier this month...

Last week Gladstone Commercial (Nasdaq: GOOD) reported funds from operations of $10.7 million, or $0.38 a share, matching estimates.

During the quarter, the real estate investment trust acquired a $26.5 million industrial property in Philadelphia and a $51.4 million three-building office complex in Orlando, and extended the leases on a number of its commercial properties.

Gladstone’s properties are 98% occupied and, in a conference call following the announcement, management said the firm has a healthy pipeline of acquisition candidates.

We’re sitting on an 11% gain. Raise your protective stop to $20.

- Samuel Taube with Alexander Green

Live Twitter Feed