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
Overview

JPMorgan US Smaller Companies (JUSC) offers investors a portfolio of small-cap US equities, with a process that places great weight on the quality of a company and the strength of its management team. JUSC benefits from the expertise of its strong team of four dedicated investment professionals, with its lead manager, Don San Jose, having 24 years of experience. The team’s focus on quality means that they will typically forgo zero-earning stocks, binary growth stocks or so-called ‘meme’ stocks. Instead, they prefer companies with resilient business models and strong earnings, which can still remain on an upward growth trajectory. We cover the team’s process in more detail, and give examples of key holdings, in the Portfolio section.

This focus on quality has been particularly pertinent recently, as much of the market is favouring low-quality value companies which were heavily sold off during the pandemic. Although JUSC has underperformed in the near term, its managers are happy to sit on the side-lines, patiently waiting for the eventual re-rating of companies with strong earnings. As we outline in our Performance section, the team’s process has served them well over the long term, given their outperformance against their benchmark, the Russell 2000 Index.

JUSC currently trades on a 3.3% discount which is slightly wider than its long-term average, and likely the result of the headwinds that quality investing has faced recently. JUSC also has net gearing of 6.6%; while this is modest in absolute terms, it is still the highest level of any North American trust.

Analyst's View

In our view, JUSC offers investors a measured approach to a small cap sector that is increasingly characterised by volatility stemming from ‘meme’ stocks and expensive, low-earning companies. Yet by only investing in quality companies, the managers have created a generally resilient portfolio. The JUSC team believe that their portfolio of reliable companies will be carried by the strength of the companies’ earnings and management. While past performance should never guide future returns, we believe JUSC’s long-term outperformance does provide evidence of the ability of these portfolio companies to survive and outperform through various market cycles (and thus through fluctuating investor preferences).

We are currently at a late point in the economic cycle, which is arguably beneficial for US small caps. We think the ongoing US trend towards sustained economic growth thanks to support from policymakers and the subsiding of COVID-19 cases should support the earnings trajectory of JUSC’s companies. Over time we would envisage rising investor demand for smaller US companies, given their sensitivity to domestic consumption.

However, presently the managers are experiencing something of a headwind for quality companies, given the market rotation into once out-of-favour value companies. We think this may present a good potential entry point, with JUSC’s current discount likely reflecting the market’s current procyclical sentiment. Once we return to a more normalised economic environment, we may see JUSC’s discount narrow.

bull bear
Historically attractive asymmetric risk/return profile Gearing can enhance losses during down markets
Long-term economic outlook may be advantageous for small caps, but short-term headwinds offer attractive entry point
If the value rally continues then JUSC may continue to underperform in the near term
Continues to retain its long-term bias to quality companies
Small-cap strategies are associated with higher volatility
Continue to Portfolio

Fund History

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...
27 Sep 2017 Fund Analysis
A growth-orientated Indian equity trust with a track record of long-term outperformance run by a highly-experienced management team...
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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