JPMorgan Chase & Co. (JPM), Goldman Sachs Group, Inc. (GS): How Is This Scandal Affecting Your Investment in Financials?

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By comparison, Wells Fargo & Co (NYSE:WFC) is up 6.92% over the past month. Wells Fargo has a slightly higher dividend yield of 2.95%, and a P/E ratio of 11.52. The larger financial stocks appear to be mirroring one another, showing no appreciable effect of the scandal. The only conceivable way that JPMorgan Chase & Co. (NYSE:JPM) and Goldman could have been hurt is if the Bloomberg employees were able to ascertain certain trades or strategies used by the companies and somehow exploit the same, which would only be shown by a downturn in earnings for the companies. This does seem unlikely. Further, the snooping had been going on for years, whereby any large impact on the companies would appear to be negligible.

As a practical matter, Bloomberg’s clients may gravitate to other platforms, including the main competitor in Reuters 3000 Xtra platform, which could conceivably result in a loss of market share for the company. Thompson Reuters could see some marginal revenue increase as a result. Thompson Reuter’s share price is down 1.53% in the last month, but is up 17.84% year to date. Thompson Reuters reported revenue of $3.1 billion for the first quarter, with adjusted earnings of $0.38 per share, beating estimates of $0.32 per share. Investors could make a play betting on Thompson Reuters picking up business from disgruntled Bloomberg clients, resulting in better revenue and earnings and an uptick in share price.

Although the practice by Bloomberg reporters was clearly unethical, which Bloomberg has admitted, it likely does not rise to the level of fraudulent. Since the reporters could not see specific information on portfolios and trades made, there was no leak of proprietary information. Thus, despite the competition from Thompson Reuters, Bloomberg terminals are firmly entrenched in the financial world, and any loss of market share could be a mere blip on the screen, as it were.

The article How Is This Scandal Affecting Your Investment in Financials? originally appeared on and is written by Mike Thiessen.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and Wells Fargo & Co (NYSE:WFC). The Motley Fool owns shares of JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo. Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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