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
JUSC’s quality bias has driven its recent outperformance, although it still trades on a historically wide discount…
Overview

JPMorgan US Smaller Companies (JUSC) follows an investment philosophy that aims to identify high-quality investment opportunities within the US small-cap market. The trust is managed by the highly experienced team of Don San Jose, Dan Percella and Jonathan Brachle. The importance of quality is ingrained in the team’s investment process, be that through the quality of management and the business model.

As we highlight in the Portfolio section, the team have made some subtle changes to JUSC, capitalising on recent market movements. Specifically they have rotated into banks and out of real estate, based on the comparative valuation opportunity. JUSC is ultimately a low-turnover strategy with a circa four-year holding period, and the team are confident in the overall outlook for US small caps, thanks to the robust consumption outlook. However, they believe a prudent and balanced approach to stock selection is important as growth and value factors are unlikely to dominate returns like they have done in recent years.

JUSC’s Performance has been strong over both a five- and a one-year period, primarily as a result of its quality bias. The team’s aversion to the more speculative end of the market has been of particular importance in the near term, as the more highly valued, low- to zero-earning companies have been hit hard by rising interest rates and market risks. Despite JUSC’s recent outperformance it currently trades on a 7.9% Discount, wider than its own long-term average.

Analyst's View

We believe that for long-term investors, JUSC’s quality-focussed but ultimately balanced approach to investing may be desirable. JUSC’s commitment to the quality factor is encouraging, as clear stylistic commitment makes a portfolio more reliable and indicates a team who are confident in their investment process.

Given the outlook for higher interest rates, the market environment has the potential to become difficult for high-growth small caps, which could support JUSC’s quality approach. High-quality companies should be able to better insulate investors from the damage of rising inflation, and so JUSC may be well positioned for the current environment. As a result, JUSC’s wide discount in comparison to its historical levels may offer an attractive entry point.

We believe that JUSC works well as a stand-alone US small-cap allocation, given it is managed to achieve a stylistic balance while retaining a high active share. We also note that in today’s heightened-risk environment, domestically focussed US small caps could be an unconventional form of ‘safe haven’ thanks to the country’s relative economic strength, and that is what the managers believe. However, we note that small-cap investing is inherently riskier than large-cap investing, which may not make it suitable for conservative investors.

Bull

  • Quality factor has better insulated JUSC from recent market downturns in comparison to its benchmark
  • Consistent focus on solely high-quality businesses and management teams
  • Historically wide discount may offer attractive entry point

Bear

  • May struggle in periods of stylistically driven equity markets
  • Gearing can enhance losses on the downside
  • Small-cap investing may not be suitable for low-risk investors
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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