Complete your registration today for a chance to win £50 John Lewis vouchers in our weekly draw Enter now
Alan Ray
View profile
Updated 27 Mar 2024
Save Article Download

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan American. 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.

  • JPMorgan American (JAM) produced a net asset value total return of 24.7% in the year to 31/12/2023 compared to the trust's benchmark, the S&P 500, which produced an 18.9% total return.
  • Outperformance was mainly driven by good stock selection. Contributors included semiconductor stock NVIDIA, which rose over 200% after a sequence of positive earnings revisions. Semiconductor design company Advanced Micro Devices also performed well, with both stocks benefitting from tailwinds relating to Artificial Intelligence (AI). Digital security company Palo Alto Networks saw gains due to the increasing priority corporates are placing on cyber-security. Travel company Booking Holdings reported record earnings as the industry continues to bounce back from the pandemic and the company has cemented its leading position.
  • Detractors included Bristol-Myers Squibb and Bank of America, although the manager remains confident in the longer-term prospects for both and the holdings were retained. A position in SolarEdge Technologies was sold.
  • Since JAM implemented its current investment strategy on 01/06/2019 to the end of February, it has generated a NAV total return of 116.3% compared with a benchmark return of 97.3%, an annualised outperformance of 2.2 percentage points.  
  • During the year, JAM traded between a discount of 7.3% and a premium of 0.4%. Under normal circumstances the board is prepared to buy back shares at anything more than a small discount and during 2023 bought back £45m, or 2.5%, of the trust's shares at an average discount of 3.8%. Post-year end, JAM has traded at a premium and re-issued 150,000 shares from treasury.
  • At 31/12/2023 91.5% of JAM's assets were invested in a 40-stock US large cap portfolio, with 54% of this in growth and 46% in value stocks. The small cap portfolio made up another 6.5%, with the balance in cash or near cash. In November 2023, the small cap portfolio, previously a growth strategy, was altered to a blended growth and value approach, more in keeping with the large cap strategy.
  • JAM was geared 2.8% at year-end and is currently geared 3.1%.
  • Total dividends of 7.75p  represent an increase of 6.9% on the previous year. JAM has 1.6 years' revenue reserves. The dividend represents a yield of c. 0.8% on the current share price.
  • Dr Kevin Carter, chair, said “It is encouraging to see inflation trending down and the US economy performing more strongly than expected, and seemingly likely on the glide path to a soft landing. This bodes well for US equities in the year ahead, although there are, as ever, potential threats, especially on the geopolitical front. There is an unusually high degree of uncertainty about the implications of the US presidential election outcome later this year for both domestic US policy and for the nation’s international relations. However, the Board believes that the Company’s Manager has already demonstrated its considerable skill in navigating the many unique challenges equity markets have faced over recent years, as evidenced by their performance track record. The Board is confident that the investment process and deep resources of the Manager, in combination with the Company’s investment structure and policy, continue to present shareholders with an attractive long term investment proposition."

JPMorgan American's (JAM) performance in 2023 is a good illustration of how a flexible portfolio which encompasses both value and growth, both with an emphasis on quality, can capture opportunities in the market that could have been missed by a single-style portfolio. Remember, JAM is a core holding and although a relatively concentrated portfolio, it is not a single-sector specialist. To produce such strong outperformance in 2023, when the market was dominated by a very narrow group of stocks in the technology sector, is a testament to the team's stock-picking.

This performance has, in our view, cemented JAM's position as a core holding, and even as the investment trust sector is on average experiencing very wide discounts, driven by sentiment and technical issues such as cost disclosures and the consolidation of the wealth management industry, a significant shareholder of investment trusts, JAM has retained a narrow discount or premium. JAM in our view provides a template for what a successful equity investment trust looks like: an investment proposition that is clearly understandable, adds value through a well-thought-out active strategy as well as through gearing, and which is able to step in and buy shares back when needed, without any particular concerns about what that might do to the portfolio mix, or to gearing. With M&A picking up speed in the investment trust sector, JAM is a good example for trusts wondering what the benefits of scale are w, not least because JAM's significant outperformance came with an ongoing charges figure of 0.38%.

The team's outlook for the US centres around an economic soft landing accompanied by lower inflation and falling interest rates, combined with relatively stable oil prices. They do though acknowledge the various risks around this, from a US presidential election to rising geopolitical tension, as well as the longer-term impact of higher interest rates and fiscal deficits. And while valuations in the narrow group of stocks that led the S&P 500's performance last year may be at the optimistic end, the team sees many valuation opportunities elsewhere. Indeed, the team notes that a great deal of 'cautious cash' remains invested in money market funds as investors climb the proverbial wall of worry, which could provide significant momentum to the equity market if that starts to flow back into equities. This chimes with our recent observation that UK investors are typically underweight the US, and in our view JAM provides a very well thought-out core holding for any investor seeking to rectify that situation.

Press continue to read the full article...

Kepler Trust Intelligence provides research and information for professional and private investors. In order to ensure that we provide you with the right kind of content, and to ensure that the content we provide is compliant, you need to tell us what type of investor you are.

Continue

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.