JPMorgan American 05 April 2022
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by JPMorgan American. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
To achieve capital growth from North American investments by outperformance of the S&P 500 Index.
JPMorgan Asset Management
Eytan M. Shapiro; Jonathan K.L. Simon; Timothy RV Parton;
Association of Investment Companies (AIC) Sector
12 Month Yield
Dividend Distribution Frequency
Latest Market Capitalisation
Latest Net Gearing (Cum Fair)
Latest Ongoing Charge Ex Perf Fee
(Discount)/ Premium (Cum Fair)
Daily Closing Price
JPMorgan American (JAM) follows a distinctive approach to US equity investing, blending both growth and value styles through two separately managed allocations which are run by Timothy Parton and Jonathan Simon respectively. JAM also retains a small but dedicated allocation to US small-cap growth stocks. While the trust has a slight tilt towards growth stocks – with a 52% allocation at the time of writing – the team have their strongest conviction in value names, with nine of JAM’s ten largest overweight positions being in value stocks.
The team have made few changes to their portfolio over recent months, which they believe has been justified by the strong earnings reports of their holdings. As we describe in the Portfolio section, the team have a nuanced approach to diversification, both within their own allocations and at an aggregate portfolio level.
JAM has demonstrated impressive Performance since adopting this strategy, having beaten both its benchmark the S&P 500 and its peer group since June 2019. JAM has also generated strong performance over the past 12 months, with its balanced approach to factors benefitting shareholders in a volatile market.
JAM currently trades at a 3.6% Discount that is narrower than both that of its peers and its own long-term average, which we think is the result of the board’s judicious approach to discount control, having bought back c.2% of outstanding shares over the last 12 months, as well as being due to JAM’s long-term return profile. We note that JAM also has by far the lowest Charges in the peer group, with an OCF of a mere 0.34%.
We believe JAM offers investors a ‘one-stop shop’ approach to US equity investing, capturing alpha potential from both growth and value styles, albeit with a clear preference for high-quality businesses. This should give investors the comfort of knowing that they will not be caught on the wrong side of stylistic rotations in US equities, something which has become ever more important over the last 12 months. We think that JAM’s use of two highly experienced specialist managers is a key advantage, as not only do they have a deep understanding of the nuances of growth and value investing, but they have also experienced multiple economic cycles in the US. We think this is very important, given the current market volatility.
We are also encouraged by JAM’s long-term outperformance of the S&P 500, which can be a very difficult thing to achieve given how efficient the US large-cap market is. Given the managers’ successes in adding value while still offering a ‘core’ portfolio, JAM could also be an option for investors looking to replace a passive exposure to the US, especially when one considers JAM’s low OCF.
Due to the difficult market environment we currently find ourselves in, we believe that investors could be well served over the near term by taking a more prudent approach to investing, with JAM offering investors a way to ‘hedge their bets’ by simultaneously allocating to both growth and value. While value stocks can outperform during periods of rising interest rates and economic activity, the current risk factors could see a reduction in interest rate expectations which might lead to a resurgence in growth stock outperformance.
- A balanced allocation has been able to outperform in a difficult market environment
- Lowest OCF in the peer group
- Blended portfolio offers a ‘one-stop shop’ solution to US equity investing
- Gearing can enhance losses on the downside
- Can underperform during strong growth or value momentum
- Lack of an attractive yield may prevent it from being a solution for income investors