The Pro: Brian McMahon, chief investment officer at Thornburg Investment Management and co-manager of the Thornburg Investment Income Builder THORNBURG INVESTMENT INC BUILDER A TIBAX -0.3% fund. The Fund: Thornburg Investment Income Builder owns shares of large, value-oriented companies around the world. Over the past five and 10 years, the fund has beaten 95% and 86% of its peers, respectively. The Pick: J.P. Morgan Chase JP MORGAN CHASE & CO. JPM -0.88% The Case: Long a banking industry darling, J.P. Morgan Chase has had a rough couple of years. After winning plaudits for deftly navigating the global financial crisis, America’s biggest bank by assets has been dogged by one scandal after another — from mammoth trading losses of the ‘London Whale’ to mortgage-related problems at Bear Stearns and Washington Mutual, two companies it acquired during the crisis. In all, the House of Morgan has agreed to pay more than $25 billion in fines. To put that in perspective, the bank’s total reported net income last year was just under $18 billion. Even chief executive Jamie Dimon has lost public esteem amid growing skepticism about his brash leadership style and outsize pay. No wonder J.P. Morgan shares have lagged the market — and industry peers — for the past five years despite earning more than $87 billion in profit. JPM data by YCharts McMahon thinks it’s time for investors to give the bank a fresh look. “You’ve got a household name in the U.S … and around the world,” he says. Bad behavior, but good value Chalk it up to bad timing. J.P. Morgan’s legal troubles arrived just as the rest of the broad market began to soar. But investors can turn that into an advantage, says McMahon. With the market up 53% over the past three years, McMahon estimates large company stocks are trading at price/earnings ratios of about 15, based on estimated 2014 profits. J.P. Morgan Chase, which has gained 38% sports a P/E ratio of only about nine. McMahon thinks the stock looks cheap, especially since J.P. Morgan has traded at an average P/E of 11 over the past decade. Dividend Potential In March, J.P. Morgan hiked its quarterly dividend to 40 cents from 38 cents. It might have gone further, McMahon says, but the Federal Reserve, still worried about the health of the banking system, has required banks to hold onto cash to strengthen their balance sheets. That can’t go on forever. With interest rates likely to rise in the long run — boosting what J.P. Morgan can earn on its $1.3 trillion of checking, savings and other deposits — he expects the company should be able to roughly double what it pays out to shareholders in the future. Is There Another Shoe to Drop? The big question: Is the worst of J.P. Morgan’s regulatory problems truly over? McMahon thinks so. But there is no guarantee. “The government keeps hounding them and extracting fines for one thing or another,” he says. He’s quick to add: “There’s the shadow of them just being dogged.” Just last month the former head of J.P. Morgan’s China investment banking team was arrested amid yet another scandal, this one focused on whether the giant bank inappropriately hired children of top Chinese officials in order to win business. J.P. Morgan didn’t respond to a call for comment by press time.