You want Value, but Active or Passive?


Consider this, JP Morgan (JPM) is the 2nd largest holding & #1 bank in the S&P500 Value index @ a 2.7% weighting.

Goldman Sachs (GS) is 29th at 0.68%.

It’s quarterly earnings time.

JPM reported revenue growth of 14% & an ROE of 23%, flattered by credit loss provision reversals.

Strip provisions out from both periods & net income declined.

CET1 ratio = 13.1% (capital ratio)

They returned $7.1bn to shareholders = 1.5% of mkt cap.

Goldman more than doubled revenue as most divisions generated “record” (said 20x in conf call) numbers.

Credit losses didn’t move the needle either year – not as exposed to consumers.

ROE was a “record” 31%

CET1 14%

#1 rankings in M&A & equity offerings, Assets under supervision up $60bn in the quarter! to $2.2trillion.

Returned $3bn = 2.5% of mkt cap

There’s no competition – those smart folk at Goldman Sachs smashed it on every metric – growing faster, less geared to the economy, better capitalised, returning more.

Archegos didn’t even hurt them.

So JPM at 2.3x tangible book / 12x earnings


GS at 1.3x tangible book / 7x earn

Because the Passive People have 4x as much in JPM than GS


It’s larger & most Passives are size weighted.

Does that make financial sense?