Investment Trust JP Morgan American is a £1.3 billion fund designed to provide investors with exposure to the US stock market without any major surprises.
It is run by Brits Jonathan Simon and Timothy Parton from New York – longtime collaborators at JPMorgan, with over 75 years of investment experience between them. The fund represents their ‘extremely best’ stock ideas.
“We want this to be the medium that the U.S. has,” says Parton. UK investors should be comfortable looking for funds.
The pair have jointly run a stock market listed trust since June 2019 and have cemented their mark on the portfolio.
The fund’s key performance driver is a concentrated portfolio of 40 large US companies, many of which are names familiar to UK investors. The top ten holdings include Microsoft, Alphabet, Apple and Amazon.
It also has exposure to a 130-strong portfolio of smaller companies, which represent five percent of the trust’s assets.
They are supervised by colleague Eaton Shapiro. Flexibility, Parton says, is the name of the game. “Yes, the biggest holdings are essentially strong, hard-to-beat companies that are in growth mode,” he explains. ‘But there is more to this fund than just that.’
So, in addition to its smaller company holdings – in firms such as trucking business Sia and tech firm CyberArk – the trust also holds prominent positions in several larger companies that are more ‘value’ than ‘growth’ stocks. In other words, they are businesses whose value is not fully reflected in their share price, but is based on strong cash flows.
Examples include Loews, a company with diverse business interests in everything from insurance and hotels to packaging. “It’s an organization that generates a lot of cash,” says Parton.
Others include utility company Xcel Energy, forestry conglomerate Weierheuser and conglomerate Berkshire Hathaway, whose chief executive is the great Warren Buffett – a passionate believer in value investing. “Jonathan attends the company’s annual general meeting every year,” says Parton. ‘He is a believer.’
Managers are not afraid to close shares if they feel they are overvalued. The stake in electric car maker Tesla was settled due to fears that the shares were looking overpriced. ‘We can come back to this at some stage,’ Parton says. ‘We still love business.’ The stakes in Marathon Petroleum and Raytheon Technologies were also recently liquidated on environmental, social and governance (ESG) grounds.
The trust’s performance figures are good. It has outperformed its competitors with returns of 35, 53 and 121 per cent in the last one, three and five years. It has also outperformed its benchmark S&P500 index.
Yet Parton says there’s no room for complacency. He adds: ‘Every other Wednesday, we sit together and sift through the portfolio for hours asking a simple question, ‘Are we happy with each individual stock that we own? Should we sell them or keep them?’ It’s a discipline that seems to be working well. Though we as fund managers are true believers in what we are doing, yet we never stop worrying.
The trust pays dividends twice a year, but this is the minimum. In the previous year, it totaled 6.75pa shares – this compares with the current share price of £6.78. An attractive feature of the trust is its fees, which are as high as 0.34 percent per year competitively.
The stock market identification code is BKZGVH6 and the ticker is JAM.