Solid yield companies with good cover that don't fall into a yield trap is the stable part of my overall portfolio, so I sold a small growth stock (with a small gain) and bought JP Morgan that I think will be a good solid yield stock in 2022 and beyond.
Now bank stocks are together with Norwegian saving banks stocks about 10 % of my portfolio. I intend to increase that part to 15 - 20 percent during 2022 where another candidate is Credit Suisse where the stock is noted in CHF. So I decided to stand on the station with JP Morgan when the small growth train left the station. Will that train start the year descending into the valley, before it starts to climb the next mountain? When these words are written, I still have some Norwegian growth stocks (mainly green and tech) noted in NOK in my overall portfolio. The Norweigan Krone (NOK), fluctuates with the oil price, so some stocks noted in other currencies, USD and CHF is a currency hedge and a hedge against recessions and stock market corrections. The USD, CHF and YEN tend to rise in value with increasing uncertainty in the global economy and the stock market. I hope JP Morgan will continue to be a friend in the coming years, continue their dividend policy and increase in value when the interest rate increases. I feel well standing on the train platform of the train station together with JP Morgan when the small growth train leaves the station.
2022 are a few days away. The consensus is that the FED will increase interest rates at least two times during the year, even in case of a new Covid-19 variant. The Dow Jones index is by some called the global stock market's bell sheep, while the US10Y (US Government bonds 10 yr yield) is sometimes called the super tanker of the global financial markets and also the anchor point of the worlds interest rates. The discount factor in the Net Presnt Value (NPV) formulae that is used to value stocks, is an interest rate, and when the discount factor increases, the NPV decreases.
Some use a real option model to value small upstart (growth) companies that don't make money, according to the Black & Scholes (B & S) formulae where the interst rate enters with a term −e**(-rt) where r is the risk free interest rate, e the base of the natural logarithm, t time and ** the power operator. We note that when the interest rate increases, we get a smaller deduction in the B & S forumlae (use a search engine to find the forumlae unless you know it) and the (call) option price increases. (The interest rate also enters the argument of the Normal distribution, but the last r term in the numerator of the B&S fromulae is stronges). So if a small upstart company are valued as a real option, it should get a higher fair value. But the opposite seems to be the case, upstart (growth) companies are hit especially hard when the discount factor (interest rate) increases.
Since banks ceteris paribus earns relatively more than many other companies when the interest rate (spread) increases that is the main reson I included JP Morgan in my overall portfolio. The brand is strong, it is a yeild company and the stock is noted in USD as I regard as an advantage (currency hedge for the Norwegian Krone (NOK).
Some fear crypto, the block chain, decentralised finance and fintech. I stand by the brand and a solid bank whose stock is noted in USD.