jpmorgan us smaller companies investment trust plc annual … · 2017-08-04 · enterprise value...

JPMorgan US Smaller Companies Investment Trust plc

Annual General Meeting

25 April 2016

Fiona Harris, Executive Director, Client Portfolio Manager

1

Daniel Percella,

Executive Director

Co-Portfolio Manager /

Research Analyst

Industry Exp: 14 years

JPM Exp: 8 years

Don San Jose,

Managing Director

Portfolio Manager


JPM Exp: 16 years

Jonathon Brachle,

Executive Director

Research Analyst


JPM Exp: 9 years

Jason Blumstein,

Vice President

Research Analyst


JPM Exp: 9 years

A tight knit team with a disciplined focus on delivering alpha

Source: J.P. Morgan Asset Management.

As of March 2016.

There can be no assurance that the professionals currently employed by J.P. Morgan Asset Management will continue to be employed by J.P. Morgan Asset Management or that the past performance or success of any such professional serves as

an indicator of such professional’s future performance or success.

Also leverages the insights of the J.P. Morgan Equity organization,

which includes over 40 research analysts in the US

Chris Carter,

Vice President

Research Analyst


JPM Exp: < 1 year

2

Our investment philosophy - We are fundamental bottom-up stock pickers

The targets and aims provided above are the Investment Manager’s targets and aims only and are not necessarily part of the Trust’s investment objectives and policies as stated in the prospectus. There is no guarantee that these will be achieved.

Our approach leads to a portfolio that has historically shown less volatility

than the market with less exposure to the downside

Quality Business Quality Management Valuation

We focus on quality first:

durable business model

consistent earnings

clear competitive advantages

high return on invested capital

sustainable free cashflow

Management is key:

good stewards of capital

committed to increasing shareholder

value

track record of success

Valuation is critical:

Price/earnings

Price/book value

Private market analysis

Free cashflow yield

Enterprise value analysis

3

Portfolio Review

4

JPMorgan US Smaller Companies Investment Trust plc: 2015 Performance

Past performance is not necessarily indicative of future results.

The current portfolio management team assumed responsibility of the portfolio November 2008.

1Change in share price with net dividends, if any, reinvested (Source: Morningstar).

2Change in net asset value per share with net dividends, if any, reinvested (Source: J.P. Morgan Asset Management).

3Change in the Index with net income reinvested, in sterling terms. Comparison of the Company’s performance is made against this index. The benchmark is a recognized index of stocks which should not be taken as wholly representative of the

Company’s investment universe. The Company’s investment strategy does not follow or “track” this index and therefore there may be a degree of diversity in performance from the main index stated. (Source: Russell Investments)

4Arithmetic difference between the net asset value and the index

As of December 2015

FY 2015

JPM US Smaller Companies IT share price1 6.8%

JPM US Smaller Companies IT net asset value2 4.0%

Russell 2000 Index Net (£)3 0.9%

NAV Excess return4 3.1%

5

Russell 2000 Sector performance

14%

6% 6% 6% 5%

-5% -8%

-10%

-40%

Health Care FinancialServices

ConsumerStaples

Technology Utilities ConsumerDiscretionary

ProducerDurables

Materials &Processing

Energy

2015 Russell 2000 sector performance in GBP

Source: Wilshire.

For the twelve month period ending 31 December 2015

6

4%

14% 16%

1% 5% 5%

-3%

15%

-10%

14%

6% 6% 6% 5%

-5% -8%

-10%

-40%

Health Care FinancialServices

ConsumerStaples

Technology Utilities ConsumerDiscretionary

ProducerDurables


Energy

Portfolio Russell 2000

2015 sector performance in GBP

Source: Wilshire. The portfolio is an actively managed portfolio; holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. The above data excludes cash and

gearing.

For the twelve month period ending 31 December 2015

Sector performance

7

2015 performance attribution in GBP

Source: J.P. Morgan Asset Management, FactSet, Wilshire Atlas. The above data excludes cash and gearing. Past performance is not a guarantee of future results. The inclusion of the securities mentioned above is not to be interpreted as

recommendations to buy or sell.

For the one year period ending 31 December 2015

Stock attribution (relative to Russell 2000)

Attribution Summary1

Stock: +7.72%

Sector: -2.50%

Sector attribution (relative to Russell 2000)

Positive contributors Return (%) Average Weight

Diff (%) Impact (%) Negative contributors Return (%)

Average Weight

Diff (%) Impact (%)

Waste Connections 36.91 2.73 0.85 Rovi -53.81 0.83 -0.82

Patrick Industries 56.95 1.53 0.69 Ascent Capital Group -66.58 0.69 -0.70

POOL 36.59 1.88 0.61 Career Education -53.49 0.35 -0.50

Jarden 26.21 2.57 0.59 RLJ Lodging Trust -28.30 1.33 -0.47

Freescale Semiconductor 32.12 0.62 0.54 Generac Holdings -32.65 0.91 -0.38

2.0% 1.8% 1.7% 1.2%

0.6% 0.4%

0.0% -0.8%

-1.6% Materials &Processing

ConsumerDiscretionary

Financial Services Energy Producer Durables Consumer Staples Utilities Technology Health Care

8

JPMorgan US Smaller Companies Investment Trust plc: Annualised Performance

Past performance is not necessarily indicative of future results.

*The current portfolio management team assumed responsibility of the portfolio November 2008. These figures are run from 30 November 2008 through 31 March 2016.

1 Change in share price with net dividends, if any, reinvested (Source: Morningstar).

2 Change in net asset value per share with net dividends, if any, reinvested (Source: Morningstar).

3 Change in the Index with net income reinvested, in sterling terms. Comparison of the Company’s performance is made against this index. The benchmark is a recognized index of stocks which should not be taken as wholly representative of the

Company’s investment universe. The Company’s investment strategy does not follow or “track” this index and therefore there may be a degree of diversity in performance from the main index stated. (Source: Morningstar)

4 Arithmetic difference between the net asset value and the index

As of 31 March 2016

FY

2015

Q1

2016

One

year Three years Five years Since 11/08*

JPM US Smaller Companies IT

share price1 6.8% -5.6% -9.5% 11.4% 12.7% 20.3%

JPM US Smaller Companies IT

net asset value2 4.0% 6.3% -0.9% 11.7% 13.1% 20.3%

Russell 2000 Index Net (£)3 0.9% 0.9% -7.0% 8.5% 9.3% 15.0%

NAV Excess return4 3.1% 5.4% 6.1% 3.1% 3.8% 5.3%

9

Q1 2016 performance attribution in GBP

Source: J.P. Morgan Asset Management, FactSet, Wilshire Atlas. The above data excludes cash and gearing. Past performance is not a guarantee of future results. The inclusion of the securities mentioned above is not to be interpreted as

recommendations to buy or sell.

For the QTD period ending 31 March 2016

Stock attribution (relative to Russell 2000)

Attribution Summary1

Stock: +3.76%

Sector: +1.71%

Sector attribution (relative to Russell 2000)

Positive contributors Return (%) Average Weight

Diff (%) Impact (%) Negative contributors Return (%)

Average Weight

Diff (%) Impact (%)

Waste Connections 17.88 2.24 0.60 Hanger -59.48 0.45 -0.38

Toro 21.28 2.67 0.53 E. W. Scripps -15.86 1.16 -0.19

National Retail Properties 19.52 1.57 0.30 Monarch Casino & Resort -12.17 1.13 -0.16

Patterson-UTI Energy 20.51 1.34 0.27 Sequential Brands -17.16 0.81 -0.16

POOL 11.73 2.08 0.27 NetSuite -17.00 0.68 -0.16

3.2%

1.9%

0.5% 0.2% 0.2% 0.1%

0.0% -0.2% -0.3%

Health Care Producer Durables Energy Materials &Processing

Financial Services Consumer Staples Utilities ConsumerDiscretionary

Technology

10

Sector absolute and relative1 weights

Sector weightings

Source: J.P. Morgan Asset Management, FactSet. 1 Reflects relative position to the Russell 2000 Index. Holdings, sector weights, and allocations are subject to change at the discretion of the Investment Manager without notice

As of 31 March 2016

22.7%

19.0% 16.9%

9.8% 9.7% 7.4%

4.1% 3.9% 3.5% 3.0%

-4.4%

4.3% 4.3% 3.6%

-4.0%

-7.2%

0.7%

3.9%

1.2%

-2.4%

FinancialServices

ConsumerDiscretionary

ProducerDurables


Health Care Technology ConsumerStaples

Cash Energy Utilities

Absolute Relative

11

Top ten holdings

The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not positions on behalf of its clients in any or all of

the aforementioned securities.

Source: J.P. Morgan Asset Management, FactSet.

As of 31 March 2016

Top Ten Holdings Portfolio Weight Benchmark Weight Relative Weight

Toro 2.74% 0.00% 2.74%

AptarGroup 2.59% 0.00% 2.59%

Spectrum Brands 2.53% 0.00% 2.53%

Douglas Dynamics 2.14% 0.03% 2.11%

POOL 2.08% 0.23% 1.85%

IDEXX Laboratories 1.97% 0.00% 1.97%

Brinker International 1.72% 0.00% 1.72%

Waste Connections. 1.71% 0.00% 1.71%

Silgan Holdings 1.71% 0.00% 1.71%

West Pharmaceutical Services 1.68% 0.31% 1.38%

12

Stock example: Toro Company (TTC)

Overview

Toro Company designs, manufactures and markets professional turf

maintenance equipment, turf irrigation systems, landscaping equipment,

snow removal equipment and other products.

Attributes

The company has a strong brand history built over 100 years. Having a

strong competitive position with high market share, the company is the

innovation leader where more than 30% of sales has derived from new

products.

Experienced management team with a solid track record of meeting long-

term targets of generating consistent sales and earnings growth and the

flexibility to make strategic acquisitions in a competitive industry.

Figures as of 31 March 2016. Source: Bloomberg, Toro website, J.P. Morgan Asset Management. There is no guarantee this holdings will remain in the portfolio and holdings may change at the portfolio manager’s discretion without notice. The

information in this case study is intended as an example only and should not be construed as advice, it may not be suitable for your particular circumstances and if you are unsure of the suitability of any investment you should seek financial

advice. Past performance is not a guarantee of the future. The opinions and views expressed here are those held by the author as at date of this document, which are subject to change and are not to be taken as or construed as investment

advice. J.P. Morgan Asset Management may or may not hold positions on behalf its clients in any or all of the aforementioned securities.

Stock price from 01 January 2006 through 31 March 2016

0

10

20

30

40

50

60

70

80

90

100

Ma

r-0

6

Sep-0

6

Ma

r-0

7

Sep-0

7

Ma

r-0

8

Sep-0

8

Ma

r-0

9

Sep-0

9

Ma

r-1

0

Sep-1

0

Ma

r-1

1

Sep-1

1

Ma

r-1

2

Sep-1

2

Ma

r-1

3

Sep-1

3

Ma

r-1

4

Sep-1

4

Ma

r-1

5

Sep-1

5

Ma

r-1

6

Toro Company

13

Stock price from 01 July 2014 through 31 March 2016

Stock example: Catalent Inc. (CTLT)

Overview

Catalent, Inc. provides delivery technologies and development solutions for

drugs, biologics and consumer health products.

Attributes

With over 80 years serving the industry, Catalent is a global leader in

pharmaceutical contract manufacturing which has one of the most durable

and predictable business models in the sector.

Catalent’s capabilities and track record for safety in addition to strict FDA

regulations position the company as the top partner in outsourcing.

Positive outlook as the consumption of pharmaceuticals is improving.

A growing innovative pipeline of products should drive growth.

Figures as of 31 March 2016. Source: Bloomberg, J.P. Morgan Asset Management. Google Images. There is no guarantee this holdings will remain in the portfolio and holdings may change at the portfolio manager’s discretion without notice. The

information in this case study is intended as an example only and should not be construed as advice, it may not be suitable for your particular circumstances and if you are unsure of the suitability of any investment you should seek financial

advice. Past performance is not a guarantee of the future. The opinions and views expressed here are those held by the author as at date of this document, which are subject to change and are not to be taken as or construed as investment

advice. J.P. Morgan Asset Management may or may not hold positions on behalf its clients in any or all of the aforementioned securities.

0

5

10

15

20

25

30

35

40

Jul-1

4

Aug-1

4

Sep-1

4

Oct-

14

No

v-1

4

De

c-1

4

Jan-1

5

Feb

-15

Ma

r-1

5

Apr-

15

Ma

y-1

5

Jun-1

5

Jul-1

5

Aug-1

5

Sep-1

5

Oct-

15

No

v-1

5

De

c-1

5

Jan-1

6

Feb

-16

Ma

r-1

6

Catalent Inc.

http://www.epmmagazine.com/news/catalent-presents-drug-delivery-technologies/

14

Market capitalisation

Portfolio characteristics

Source: J.P. Morgan Asset Management, FactSet, Barra, Wilshire (excludes cash). 1 Including negative earners. 212 month forward. The above portfolio characteristics are shown for illustrative purposes only and are subject to change without notice.

As of 31 March 2016

Portfolio Portfolio Index*

Market capitalization

(weighted average) $3,124m $1,878m

P/E ratio – 12 month forward1 18.4x 21.5x

Dividend Yield 1.7% 1.6%

EPS growth2 8.8% 10.4%

Return on Equity2 19.4% 14.3%

Holdings 94 1,961

Gearing 8.4% -

Turnover – trailing 12 month 20.6% -

46%

31%

17%

6%

18%

39%

33%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

> 3B 1.5 - 3B 500M - 1.5B < 500M

Portfolio

Russell 2000

15

US market review and outlook

16

Source: xxxxx. Guide to the Markets - xxxxx. Data as of xxxxx.

Annual returns and intra-year declines

GTM – US | Page 11

17


Economic growth and the composition of GDP

GTM – US |

18


Cyclical sectors


19


Consumer finances


20


Labor market perspectives


21

Estimates for 2016 Earnings

Positive earnings growth despite the negative impact of energy

Source: S&P 500 earnings are J.P. Morgan Asset Management estimates as of 31/3/2016; 1Russell 2000 earnings are IBES estimates and excluded securities which 2015 earnings are not available. Data as of 18/4/16. Opinions, estimates,

forecasts, projections and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. Shown for illustrative

purposes only. Past performance is not a guarantee of future results.

US Earnings Picture

Russell 2000 Earnings Growth 1

2016 vs 2015

Consumer Discretionary 23%

Health Care 20%

Consumer Staples 15%

Information Technology 12%

Materials 11%

Industrials 9%

Financials 6%

Utilities 3%

Telecommunication Services 2%

Energy -37%

Russell 2000 +16.2%

Russell ex-Energy +16.6%

3%

7%

16% 17%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2016E 2016E ex-Energy

S&P 500 Russell 2000

22

Summary

Fundamental, bottom-up research process aiming to outperform benchmark and peers over full market

cycle

Focus on quality companies, with strong management teams and attractive valuations

– Lower market risk

– Diversified portfolio with eye on risk management

– Solid protection in down markets

Experienced investment team led by Don San Jose, with over 19 years of industry experience

– A proven ability to pick stocks

– Strong, consistent track record

The manager seeks to achieve the stated objectives. There can be no guarantee the objectives will be met.

23

Appendix

24

JPMorgan US Smaller Companies Investment Trust: Performance attribution since manager inception* in GBP

*Manager Inception date: Don San Jose assumed co-portfolio management duties of the Trust in November 2008. Don San Jose became lead portfolio on the strategy in February 2013.

Attribution is annualized, gross of fees and also excludes cash. On 31/01/98 the benchmark for the Trust was changed from Russell 2000 to Russell 2000 Net. On 04/07/07 the benchmark changed to Russell Micro Cap Index (Total Return Net). On

01/10/09 the benchmark changed to the Russell 2000 Net Index.

Source: J.P. Morgan Asset Management, Wilshire.

Annualized performance attribution from 30 November 2008 through 31 March 2016

Stock Selection Sector Selection Total

Financial Services 2.39 -0.01 2.38

Consumer Discretionary 1.67 0.08 1.75

Technology 0.75 0.16 0.91

Producer Durables 0.62 -0.01 0.61

Energy 0.20 0.16 0.36

Materials & Processing 0.34 -0.04 0.31

Health Care 0.33 -0.13 0.21

Utilities -0.05 0.01 -0.04

Consumer Staples -0.10 -0.02 -0.12

Total 6.16 0.20 6.36

25

Investment objective and risk profile

JPMorgan US Smaller Companies Investment Trust plc

Investment Objective

– The Company aims to provide investors with capital growth by investing in US smaller companies that have a sustainable

competitive advantage and to focus on owning equity stakes in businesses that trade at a discount to their intrinsic value, with

strong management teams. The company has the ability to use borrowing to gear the portfolio to up to 15% of net assets where

appropriate.

Risk Profile

– The value of investments and the income from them can go down and up, and you may not get back as much as you paid in.

Past performance is not a guide to the future.

– Exchange rate changes may cause the value of underlying overseas investments to go down as well as up.

– Investments in smaller companies may involve a higher degree of risk as these are usually more sensitive to price movements.

– External factors may cause an entire asset class to decline in value. Prices and values of all shares or all bonds could decline

at the same time.

– This trust may utilise gearing (borrowing) which will exaggerate market movements both up and down.

Please refer to the Trust’s documents for more information relating to the Trust.

26

Disclaimer

J.P. Morgan Asset Management

This document has been produced for information purposes only and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest

thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset

Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any

forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of

this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or

notification to you.

It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount

invested. Changes in exchange rates may have an adverse effect on the value, price or income of the product(s) or underlying overseas investments. Both past performance and yield may not be a

reliable guide to future performance. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment

product(s), there can be no assurance that those objectives will be met.

J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co and its affiliates worldwide. You should note that if you contact J.P. Morgan Asset

Management by telephone those lines may be recorded and monitored for legal, security and training purposes. You should also take note that information and data from communications with you will

be collected, stored and processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following website

http://www.jpmorgan.com/pages/privacy.

Investment is subject to documentation (Investment Trust Profiles, Key Features and Terms and Conditions), copies of which can be obtained free of charge from JPMorgan Asset Management

Marketing Limited. Issued by JPMorgan Asset Management Marketing Limited which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No:

288553. Registered address: 25 Bank St, Canary Wharf, London E14 5JP.

4d03c02a80035162

http://www.jpmorgan.com/pages/privacy

jpmorgan us smaller companies investment trust plc annual … · 2017-08-04 · enterprise value...

Documents