How Jamie Dimon Turned Crises Into 170% Gains
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?”
About Alexander Green
An expert on momentum investing, value investing and investing based on insider activity, Alex worked as an investment advisor, research analyst and portfolio manager on Wall Street for 16 years. He now runs the wildly successful Oxford Communiqué, ranked as one of the top investment newsletters by Hulbert Digest for more than a decade. He is also the author of four national best-sellers: The Gone Fishin’ Portfolio, The Secret of Shelter Island, Beyond Wealth and An Embarrassment of Riches. He shares his wisdom in his free daily e-letter, Liberty Through Wealth.