Hedge funds are now optimistic about the stock of this large company

We recently published a list of The 7 best big company stocks to buy now. In this article, we take a look at JPMorgan Chase & Co. (NYSE:JPM) stock compared to other large companies.

Mega-cap stocks—more specifically, large technology companies—continued to contribute a disproportionate share to the overall return of the U.S. stock market. Market experts estimate that from the beginning of 2023 to the end of May 2024, just a handful of the largest and most established technology companies accounted for about 60% of the S&P 500's 40%-plus gain.

FactSet reported that for Q2 2024 (with 93% of S&P 500 companies reporting actual results), about 79% of S&P 500 companies reported positive EPS surprises. On the other hand, about 60% of S&P 500 companies reported positive revenue surprises. In Q2 2024, semiconductor stocks were the key drivers for the S&P 500 index. AI themes supported other sectors, such as utilities, which sought support from higher power demand for AI data centers.

Earnings Season Q3 2024 – A Preview

Wall Street experts believe that estimates for Q3 2024 have come down, and the magnitude of the estimate cuts appears to be significantly larger than compared to the comparable periods of the first two quarters of 2024. Market participants expect total S&P 500 earnings to rise 3.9% from the year-ago period, on revenue growth of 4.7%. These estimates have been declining since the start of the period, as the current growth of 3.9% was down from 6.9% in early July.

The decline in estimates is due to risks associated with the economic downturn, slower disinflation, expectations of higher interest rates over the longer term, and increased geopolitical risks. Apart from these risks, uncertainty surrounding the US presidential election remains the main factor responsible for the decline in estimates.

Wall Street analysts expect uncertainty surrounding the U.S. presidential election to increase as we approach the November vote, potentially creating additional headwinds in an environment that is already showing signs of slowing momentum.

Reuters reported that populism, polarization and an expected neck-and-neck race can lead to a rise in the Economic Policy Uncertainty (EPU) index, which is based on headlines and was created by economics professors Steven J. Davis, Scott R. Baker and Nick Bloom. The rise in the EPU takes place when an uncertain outlook on government policy causes consumers to delay spending and forces businesses to halt investments and hiring.

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Brandywine Global Investment Management (a Franklin Templeton company), an investment management firm, believes this could happen in the current environment. The firm noted that the University of Michigan's current economic situation index is below the expectations index. Notably, this is a rare occurrence, suggesting that consumers are concerned.

Given the concerns, investors should stick with large company stocks

Analysts at Brandywine Global believe that this year's election cycle – justified or not – continues to impact the U.S. consumer, which in turn impacts the corporate sector.

In the 2020 follow-up working paper, Davis (co-founder of the EPU Index) and colleagues revealed that the EPU Index tends to rise by ~18% in November during a presidential election. When elections are close, with margins less than 5% and polarized, the EPU Index can rise by ~28% in election month.

Political uncertainty may be a stronger factor in asset prices as investors focus on the U.S. presidential election. A JPMorgan survey found that investors continue to view political risk in the U.S. and abroad as the most important destabilizing indicator for stocks.

AI fever combined with strong earnings has supported broader equity prices in H1 2024, and gains have been concentrated in technology and growth stocks. Analysts say some investors are still looking for areas of the market that have underperformed, and they expect the recent rally in the technology sector could spread to other sectors as well. Most investors welcomed signs of slowing inflation and weakening growth. As a result, the U.S. Federal Reserve has hinted at cutting interest rates. With uncertainties looming, market experts believe investors should stick with the big stocks that have a healthy track record of strong earnings.

Our methodology

To select the 7 best large company stocks to buy now, we used Yahoo Finance and Finviz stock screeners to filter out stocks with the largest market caps from various industries. Next, we narrowed down our list by selecting the large and established companies that were most popular with elite hedge funds. Finally, the stocks were ranked in ascending order of their hedge fund sentiment.

Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).

A group of business people discuss plans at a conference table decorated with the logo of a financial services company.

JPMorgan Chase & Co. (NYSE:JPM)

Number of hedge fund owners: 111

JPMorgan Chase & Co. (NYSE:JPM) provides global financial services and retail banking. The company offers services such as investment banking, treasury and securities services, asset management, cardholder services and similar services.

JPMorgan Chase & Co.'s (NYSE:JPM) cost advantages and switching costs should act as a key tailwind over the medium term. The financial services giant continues to focus on investing in organic expansion opportunities and distribution platforms. Together, these measures should support the company's share price growth over the next decade and further strengthen its competitive position.

Wall Street analysts believe that JPMorgan Chase & Co. (NYSE:JPM) is primed for “higher longer-term” interest rates. Should interest rates continue to rise, the company has a significant liquidity position that can help the company profit from interest rates or enter into deals that result from higher longer-term interest rates. On the contrary, should interest rates fall, the bank should benefit from increased lending. This is because a decline in interest rates can lead to increased lending activity.

JPMorgan Chase & Co. (NYSE:JPM) reported its financial results for Q2 2024. Net revenue was $51.0 billion, up 20%. The company's net interest income was $22.9 billion, up 4%. The company's NII was supported by the impact of balance sheet mix and higher interest rates, increased revolving balances at Card Services, and an additional month of net interest income related to First Republic. These impacts were largely offset by a reduction in deposit margins across LOBs and lower deposit balances at CCB.

Analysts at Piper Sandler increased their price target on shares of JPMorgan Chase & Co. (NYSE:JPM) from $220.00 to $230.00 and gave the company a “buy” rating in a research note on March 15.^th July. In the second quarter, 111 hedge fund managers had invested in the company and their shares amounted to $6.97 billion.

Carillon Tower Consultantan investment management firm, released its first-quarter 2024 investor letter and mentioned JPMorgan Chase & Co. (NYSE:JPM). Here's what the fund said:

JPM total 6th place on our list of the best large company stocks to buy. While we recognize JPM's potential as an investment, we believe some highly undervalued AI stocks promise higher returns, and in a shorter time frame. If you're looking for a highly undervalued AI stock that shows more promise than JPM but trades at less than 5x earnings, read our report on the cheapest AI stock.

READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.

Disclosure: None. This article was originally published on Insider Monkey.