Fund Profile

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
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Overview

JPMorgan US Smaller Companies Investment Trust (JUSC) offers investors a portfolio of US small-cap equities chosen via a bottom-up, quality-centric investment process. JUSC is run by a dedicated four-strong team, led by the experienced Don San Jose. The team look for what they consider to be the highest-quality companies, with quality being determined by a company’s business model and management quality above all other factors. While turnover is generally low, the team have taken advantage of the disruption caused by the pandemic to add over 25 new positions to their portfolio in 2020.

The market has placed an ever-increasing premium on many of the quality factors which underpin JUSC’s portfolio, thanks in large part to COVID-19, which has contributed to JUSC’s recent strong performance. Over the last five years to 13/02/2021 JUSC has been able to deliver an NAV total return of 164.9%, compared to the 163.4% of its benchmark (the Russell 2000 Index) and the 129.9% of Jupiter US Smaller Companies, its sole peer in the AIC North American Smaller Companies sector. We understand that much of this outperformance has come through stock selection, and not sector exposures.

JUSC currently (as at 13/02/2021) trades on a 1.6% premium, having recovered from its pandemic-induced discount. We note that the current premium is commensurate with the trading patterns of JUSC prior to the pandemic, where it traded around NAV (albeit with some volatility).

We would also highlight the strong ESG credentials of JUSC, which is rated as ‘above average’ by Morningstar, despite its overweight to the industrial sector: a sector which has not been historically associated with good ESG.

Analyst's View

US small caps could be an interesting place to invest at this point in the cycle. The sector is likely to see a tailwind from the stimulus measures of the new presidency, as well as from America’s vaccine roll-out. Such factors should directly support the US consumer, often the prime determinant of the fortunes of smaller companies less able to tap into overseas demand. Moreover, small-cap companies shares have historically recovered faster from a recession, as they are typically oversold during a market rout.

We think it is impressive that the team has managed to generate outperformance of the market without investing in the more speculative areas of the US small-cap sector, specifically the zero-profit names in technology and biotech which have been among the biggest winners of COVID-19. The depth of JUSC’s resources has probably contributed too. The four team members are dedicated entirely to managing the small-cap strategy, a key advantage given the amount of energy needed to analyse the many idiosyncrasies between small caps. The team have shown a clear dedication to the quality space, not just through their successful analysis, but also by leveraging their professional interactions within the industry, allowing them to identify names which fall through conventional stock screens.

We believe JUSC might also suit a more cautious investor who wishes to see evidence of consistently strong earnings and experienced management in the underlying companies – something which is not consistently present in the broader small-cap index.

Bull
Bear
Track record of successful stock selection and strong performance
Quality bias may underperform during a post-COVID-19 value rotation
New US stimulus may lead to tailwinds for US small caps
Underperformed its benchmark over one year due to avoidance of binary-outcome companies
Disciplined investment process, leading to a consistently quality-biased portfolio
Use of gearing may amplify losses in downturns
Continue to Portfolio

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…
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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