Fund Profile

JPMorgan US Smaller Companies 30 January 2020


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan US Smaller Companies. 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.

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JPMorgan US Smaller Companies Investment Trust (JUSC) aims to provide investors with capital growth through a portfolio of US smaller companies.

JUSC is actively managed, with Don San Jose as the lead manager, supported by portfolio managers Dan Percella and Jon Brachle. The team take a purely bottom-up approach to investing, searching for high-quality businesses with strong management teams. They will not, however, overlook the price they are paying, and a great deal of emphasis is placed on finding these companies at fair valuations.

Currently the portfolio is comprised of 85 companies, and there is a clear tilt towards the larger end of the small-cap universe. The largest sector overweights come from producer durables and materials & processing. We understand, however, that the portfolio is more defensive than one might anticipate from looking purely on a sectoral basis.

JUSC has an exceptional track record relative to both peers and the benchmark Russell 2000 Index, outperforming in eight of the past nine years. In fact, the managers stand out for their alpha generation relative to peers in both the AIC North American sectors (i.e. large-cap and small-cap) while still maintaining a low beta of 0.91 over the past five years to date (22 January 2020). We discuss this in more detail in the Performance section.

The trust is currently trading at a premium of 2.3%, in comparison to its one year average discount of 2.9%.

Kepler View

Over the long term, JUSC has been the standout trust in the AIC North American Smaller Companies sector. It has eclipsed its main competitor Jupiter US Smaller Companies in performance terms, and even when comparing performance and alpha generation to the broader North American large-cap sector, the trust stands out.

This strong performance has been driven through the high-quality approach the managers undertake, while trying not to overpay for opportunities. The success of their approach, which is to find fundamentally strong companies capable of growing faster than the market, can be seen in the historic earnings growth of the portfolio. The average EPS growth for the portfolio over the last five years (to 31 September 2019) was 13.4% against the index’s 8.9% over the same period.

Currently the trust is trading at premium to NAV (2.3%), in comparison to the one year average discount of 2.9%. Given the trust has traded at a premium on numerous occasions throughout 2019, should the premium slip to a discount we would view that as an attractive entry point into a high-quality trust.

bull bear
Excellent track record of alpha generation relative to both North American peer groups The US market is in the latter stages of the cycle
High-quality and valuation-led investment approach could be beneficial in an uncertain economic environment Little-to-no income for investors
High levels of alpha, with a lower beta Gearing can exacerbate the downside (as well as amplify returns on the upside)
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Fund History

31 May 2022 Fund Analysis
JUSC’s quality bias has driven its recent outperformance, although it still trades on a historically wide discount…
17 Nov 2021 How Do You Like Them Apples
Judging whether the US market is expensive is not as easy as many make it out to be…
22 Sep 2021 Fund Analysis
While the economic outlook may be good for JUSC’s quality bias, its current discount offers an attractive entry point…
15 Sep 2021 Bargains galore
We review our discounted opportunities portfolio, with one constituent rallying more than 30% in just two months…
22 Apr 2021 FAANGs for the memories
The massive outperformance of mega-cap tech last year could become a thing of the past if anti-trust legislation and negative sentiment starts to bite...
31 Mar 2021 East End boys and West End girls
Our analysts debate whether the US or Asian stock markets will deliver the best returns over the next decade…
03 Mar 2021 Fund Analysis
JUSC offers investors a portfolio of high-quality US small caps, and has a strong record of performance and alpha generation…
19 Nov 2020 Hope springs eternal
The US election has given long-suffering value investors new hope of a 'great rotation' in their favour, but that light at the end of the tunnel could in fact be a train…
11 Aug 2020 Fund Analysis
Trading at an attractive discount relative to its history, JUSC offers a diversified portfolio of high-quality companies…
13 May 2020 Sea change
While global giants like Amazon still hold the weather gauge, we examine the long term prospects for a shift in the prevailing wind...
30 Jan 2020 Fund Analysis
One of the strongest performers in its North American sectors, JUSC, offers exposure to high-quality companies with strong management teams…
28 Aug 2019 Quality street: can the dominant style continue to outperform?
For several years, quality as an investing style has dominated, outperforming both value and growth. We examine why the case for quality remains strong and the importance of taking an active approach…
24 May 2019 Fund Analysis
A trust that offers investors an excellent way to gain exposure to high quality, growth companies, through a low beta portfolio...
30 Jan 2019 The Growth Portfolio
Our ten investment trust picks for long-term capital growth...
12 Sep 2018 High flyers
Our research shows small-cap managers adding consistently more alpha, and regulatory change means this could be an attractive time to invest in the sector...
12 Sep 2018 Fund Analysis
This trust has a highly-resourced management team, which has produced consistently strong alpha, outperforming the Russell 2000 index in each of the past five calendar years...
26 Apr 2018 The $23.9 trillion dollar question*
Are US equities, which have hit record highs on 71 occasions in the last 12 months, overpriced or are they actually trading at a price worth paying?
31 Jan 2018 Fund Analysis
A stockpicking portfolio which has delivered outstanding alpha over the long term, now trading at a discount...
25 Jun 2017 American dream
Despite being one of the best performing open or closed ended US funds over one, three, and five years, JPM US Smaller Companies still trades on a discount of 8%...
22 Feb 2017 Fund Analysis
21 Feb 2017 Don't wanna be an American idiot
We highlight various routes to US exposure for those who are not sure how much faith they place in the 'Trump Bump'...
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