Topic: Growth Stocks

The Wall Street Stock Forecaster Hotline – Thursday, March 20, 2008

Article Excerpt

JP MORGAN CHASE & CO. $45.97, New York symbol JPM, got a great bargain in its agreed-upon takeover of troubled brokerage firm Bear Stearns (New York symbol BSC), assuming the deal goes through. Morgan is only paying $236 million for the company. That’s entirely in stock, and it’s less than 2% of Morgan’s 2007 earnings of $15.4 billion or $4.38 a share. Morgan will have to spend $6 billion or so to integrate Bear Stearns and deal with the inevitable class-action lawsuits from Bear Stearns stockholders. But it thinks the purchase will eventually add $1 billion to its annual earnings. To counteract Bear Stearns’ severe liquidity problems, the Federal Reserve will finance the purchase of up to $30 billion of Bear Stearns’ less liquid assets, backed solely by those assets. That greatly cuts Morgan’s risk. In light of Bear Stearns’ dire situation and the Fed’s support, anti-trust regulators will probably give the deal quick approval. The takeover also needs the approval of…