Shares of J.P. Morgan & Co. fell sharply Wednesday as investors cashed in on the stock's three-week rally.
Morgan's shares dropped $1.625, to $65.75, the biggest loser among bank stocks. But even with the setback, Morgan's shares are up about 8% this month, the biggest gain among large bank stocks.
Demand Seen for Shares
As investors search out strong banks left out of the 1992 bank stock rally, Morgan shares are expected to resume their advance. They are down about 1% this year, versus a 25% gain for the industry.
"If you run a big open-end mutual fund and you need to invest in bank stocks, you see a Morgan, which hasn't moved all year, and it is a natural," said Harry Keefe, who runs the Keefe Partners investment fund in New York.
Money-center banks in general have performed strongly this month.
Stocks of money-centers in the Standard & Poor's 500 index gained 5.6% between Dec. 1 and 22, versus 4.2% for all banks in the S&P 500 and 2.1% for the overall index.
Shares of two other moneycenter banks, Bankers Trust New York Corp. and Citicorp, are up 7% this month.
On Wednesday, Bankers Trust shares were unchanged at $68.625, just under a 52-week high. On Tuesday, the shares jumped $2.25 after Dean Witter Reynolds Inc. upgraded the stock to "accumulate" from "hold."
Citicorp shares were at $20.75, up 37.5 cents, closing in on its 52-week high.
Cash Put to Work
Money managers and analysts attributed the rally to portfolio managers attempting to profitably put cash to use before yearend.
Morgan, Citicorp, and Bankers Trust have high market values, which make them attractive to big mutual funds. Typically, fund managers seek out large-capitalization stocks because they are more liquid than smaller equities.
Some analysts also said shares of Morgan and Bankers Trust are undervalued. Investors got further incentive to buy these stocks earlier this month when both announced dividend increases.
"The money-center group trades at lower multiples than regionals," said Judah Kraushaar of Merrill Lynch & Co. "Investors look for laggards on price or value."
With a market price of 9.9 times 1992 earnings, some money managers say Morgan has "bargain" stamped all over it.
Harlan Sonderling, an analyst with the Putnam Group, cites Morgan's strong capital, dividend growth, and dominant market positions as reasons to buy the shares.
The time may have come to stop classifying Morgan and Bankers Trust as merely trading houses, said analysts.
"Both Morgan and Bankers Trust have done an awful lot in the past couple of years to demonstrate to investors that their earnings growth is not [only] driven by trading," said Mr. Kraushaar.
As for Bankers Trust, Mr. Kraushaar said its fiduciary businesses have grown 20% in each of the past three years, a better rate than during the 1980s.
Paul Mackey of Dean Witter forecast earnings of $9 a share for Bankers Trust in 1994. If this projection proves true, the stock could hit $74 next year, he said.
Citicorp shares have advanced this month because some investors have become more comfortable with the bank's recovery. Investors expect Citicorp to report encouraging fourth-quarter earnings and want to be in position to benefit from a potential rally in January.