Topic: Growth Stocks

The Wall Street Stock Forecaster Hotline – Friday, August 15, 2008

Article Excerpt

J.P. MORGAN CHASE & CO. $38.07, New York symbol JPM, fell 10% this week after the company said it would write down the value of its mortgage-backed investments by $1.5 billion due to the ongoing liquidity problems in the credit markets. That’s 36% more than its second-quarter writedowns of $1.1 billion. To put these figures in context, Morgan earned $2.0 billion or $0.54 a share after writedowns in the three months ended June 30, 2008. The company also holds $5 billion in auction-rate securities. The interest rate on these securities depends on bids that buyers submit during periodic auctions. However, demand for these securities is slowing, which hurts their liquidity. Due to pressure from regulators, Morgan has now agreed to buy back $3 billion of these securities that it sold to retail investors. Morgan will probably realize a pre-tax loss of about $400 million on the repurchase. Further writedowns are possible. However, we feel that Morgan’s wide sources of income and broad…