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Thursday, 02 October 2014

After-hours investing

JPMorgan rated most vulnerable to activist advance

Look out JPMorgan. Against a sampling of its big company peers, the Wall Street bank was judged most vulnerable to an activist investor in a straw poll of some 250 star fund managers. They gauged the institution led by Jamie Dimon as more likely than General Electric, IBM, Exxon Mobil and Berkshire Hathaway to draw the attention of an uppity shareholder.

Luckily for Dimon, this isn’t science. Rather, it is what happens after plying leading investors with liquor and Lucite. For the third year in a row, that’s effectively what Breakingviews did at the Lipper Fund Awards, convened to honor the best performing U.S. portfolio managers. If last year’s prognostications are any indication, Dimon is safe, as investors picked Morgan Stanley boss James Gorman as most likely to go. The stock has risen by half and Gorman is still very much in command.

Generally, the assembled investors were bullish. Three-quarters of them said they expect the S&P 500 Index to close the year above 1,900. Yet they also believe interest rates are heading higher: 81 percent forecast the 10-year Treasury yield would crest 3 percent by December. They don’t like bitcoin, however. About half expect the crypto-currency to fetch less than $200 by year-end.

The overall bullishness may just be a reflection of their political biases. More attendees believed the Republican Party had a chance of winning a majority in the U.S. Senate from the reigning Democrats. But the difference – 51 percent versus 49 percent – suggests a gridlocked Congress will do no evil to the U.S. growth story.

Corporate governance die-hards won’t be thrilled by responses to the question asking whether shareholder votes on executive compensation should be binding. While a vast majority last year said that companies should split the roles of chairman and chief executive, in this year’s poll only 43 percent favored forcing companies to act on votes about manager pay.

This poll isn’t binding, either. But it does reflect the opinions of the cream of the investing industry crop. If they put these views to work this year, they will also determine whether they will be back next March for another piece of Lucite.

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Context News

The following are the results of a Breakingviews straw poll of 254 U.S. stock and bond mutual fund managers at the Lipper Fund Awards on March 20 in New York. Both Breakingviews and Lipper are owned by Thomson Reuters.

What will 10-year Treasuries yield at the end of the year?

Above 3 percent - 81 percent

Below 2.5 percent - 19 percent

Where will the S&P 500 close at the end of the year?

Below 1,800 - 27 percent

Above 1,900 - 73 percent

Will the Republicans gain a majority in the Senate in November?

Yes - 51 percent

No - 49 percent

Should shareholder votes on executive pay be binding?

Yes – 43 percent

No – 57 percent

What price will a bitcoin fetch by the end of the year?

Over $1,000 – 8 percent

$750 plus – 14 percent

$500 plus – 30 percent

Under $2,000 – 48 percent

Which company is mostly likely to see an activist shareholder?

General Electric - 20 percent

JPMorgan - 37 percent

IBM – 20 percent

Berkshire Hathaway – 8 percent

Exxon Mobil – 15 percent

China’s economy will grow this year by:

4 percent – 4 percent

5 percent – 6 percent

6 percent – 8 percent

7.5 percent – 8 percent

Whatever the government says it grew by – 74 percent

 

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