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Fund Profile

JPMorgan US Smaller Companies 19 April 2023

Disclaimer

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.

Overview
JUSC offers all-weather exposure to a dynamic market…
Overview

The team behind JPMorgan US Smaller Companies (LON:JUSC) are quality-first investors in US small-cap companies. As we discuss in the Portfolio section, their fundamental research is characterised by the team’s philosophy of ‘walking the floor’ of their investee companies in order to gain an understanding of how companies really work, going beyond just meeting senior management. The team is led by Don San Jose, who has managed JUSC since 2008, together with his co-managers Dan Percella and Jonathan Brachle, and it’s a tight-knit team with a boutique feel, whilst at the same time benefitting from the vast resources of JPMorgan Asset Management. Over this time, the team have remained true to their fundamentals-led process and have developed a very consistent track record, as a result.

JUSC employs gearing up to 15% and may also hold up to 10% in cash, with the objective of amplifying returns over the long term, rather than trying to time markets in the short term. Currently, the trust is c. 7%, geared which is similar to its long-term average. JUSC is primarily designed for capital growth and any income generated is a natural consequence of investment rather than a specific target. The current historical yield is 0.6%.

JUSC has a five-yearly continuation vote, with the next vote scheduled for 2025. It does not have a fixed target discount, but the board uses share buybacks actively when the discount widens, and has been active recently during a period when the discount has been wider than average. The current discount is c. 10% and in the Discount section we consider factors that could lead to this narrowing.

Analyst's View

With almost 2000 stocks in its benchmark, the team’s active management can make a real difference to the outcome and in the Performance section we look at how JUSC has consistently matched or beaten its benchmark over at least a decade, a period when different investment styles have produced dramatically different outcomes. Beating benchmarks is one thing, of course, but in this particular case, US small caps have formed one of the best-performing developed market equity categories over very long periods of time. Therefore, we think long-term investors in JUSC have been more than compensated for the extra risk that smaller companies can bring.

We think it’s uncontroversial to expect that interest rates and inflation will lead to different behaviour by equity markets, compared to the last decade. In that context, we find it interesting that JUSC has performed well, historically, even as different investment styles have come in and out of favour. We think this is a testament to flexible thinking and pragmatism. Therefore, while the key phrase to describe the investment style is ‘quality growth’, we also think of JUSC as having an all-weather style.

There are wider discounts than JUSC’s current 10% in the investment trust sector right now, but JUSC has a good track record of stepping in with share buybacks to limit its discount. While this technique is never a guarantee, investors could still see this as a good entry point, particularly as US smaller companies, as an asset class, are currently trading at a wide discount to the market.

Bull

  • Quality exposure to a dynamic equity asset class
  • Performance has been good in all market conditions
  • US smaller companies are valued at a wider-than-average discount to large caps

Bear

  • Smaller companies can be more volatile than larger companies
  • Gearing can amplify that volatility
  • There are wider discounts currently in the investment trust sector
Continue to Portfolio

Fund History

06 Sep 2023 You should be dancing…
North America should be a core part of any portfolio…
19 Apr 2023 Fund Analysis
JUSC offers all-weather exposure to a dynamic market…
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
07 Sep 2022 American muscle
Beating US indices is a monumental task. We examine the closed- and open-ended North American sectors to see how they have fared…
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…
14 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 of high quality companies...
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...
12 Sep 2018 Fake news...
Small cap funds, despite their reputation to the contrary, are less volatile and have delivered better risk adjusted returns than their large cap peers...
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...
08 Nov 2017 Straight talking...
Bronwyn Curtis OBE, chairman of JPMorgan Asian, tells us why making the tough decisions and addressing the elephant in the room are her forte...
28 Jun 2017 American dream
We meet the chairman of JPMorgan US Smaller Companies and ask what she is doing to drum up interest and close the discount on this top performing trust...
31 Mar 2017 JPMorgan Emerging Markets Investment Trust
A large, well resourced trust offering very broadly diversified exposure to the world's emerging markets...
28 Feb 2017 Don’t wanna be an American idiot…
After such a chaotic start to Donald Trump's presidency, we look at potential options for investors in the US equity space...
27 Feb 2017 Fund Analysis
A small-cap focused US equity trust with a track record of alpha generation and outperformance relative to its peers and the wider market...
27 Feb 2017 Expert view: What next for the USA?
BlackRock North American Income fund manager Tony DeSpirito thinks we are entering a pro-growth environment...
View all

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