Taking stock: JPMorgan Claverhouse Investment Trust plc - J.P. Morgan Asset Management

Taking stock: JPMorgan Claverhouse Investment Trust plc

Contributor William Meadon

Claverhouse Investment Trust fund manager William Meadon provides his current views on the market, focusing on the recent performance of some key companies in the trust’s portfolio.

With Brexit continuing to dominate the headlines, you’d be forgiven for thinking it’s a bad time to invest in companies listed on the London Stock Exchange. But despite (or even partly because of) the immediate uncertainty, there is plenty to be positive about for UK equities.

Investor sentiment improved through the first quarter of 2019, mainly due to investors returning their focus to company fundamentals after a prolonged period of market volatility. Those in the know understand that when it comes to investing you should never let your emotions dictate, and that if it’s in the media, the likelihood is that it’s already in the price. My view is that anything but a no-deal Brexit should enable this year’s rally to continue, with investors likely to receive a very attractive average yield from UK equities: the 12-month forecast for the FTSE All Share is 5.2%, against a global average of only 2.8%1.

Claverhouse itself continued to outperform its benchmark2, the FTSE All-Share Index, in March, and while there are many uncertainties ahead, overall the UK market still looks good. To emphasise that point, let’s look at some of the stocks we particularly favour in the current Claverhouse portfolio. Investors should be aware that dividends are not guaranteed, and that past performance is not a reliable indicator of current and future results.

Investing in bricks and mortar: Barratt Developments

Despite not forming part of the FTSE 100 in 2009, UK housebuilder Barratt Developments has provided some of the strongest returns in the index over the last ten years3 and was one of its best performing shares in the first quarter of 20194. Yet negative sentiment around Brexit post-Referendum had until recently continued to affect the share price – this despite the fact that Barratt’s strategy is focused on areas outside the UK, where Brexit risk is less concentrated.

Our view is that several factors continue to make Barratts’ fundamentals look attractive. From a macro perspective, unemployment remains low – yet ONS (Office for National Statistics) data suggests more 20-34-year-olds are living at home than at any time since 1986. Meanwhile, the UK housing market remains underserved and the government is keen to encourage more housebuilding. Overall, we think Barratt are well-placed to profit from the opportunity.

Mixing it up: Fever-Tree

Another successful investment for Claverhouse has been AIM-listed mixer-drink producer Fever-Tree. Headquartered in London, the company’s marketing expertise, combined with the quality of its products, has driven explosive growth. The firm’s products are now stocked in 74 countries, with vast markets at an early stage of growth.

The relative liquidity of Fever-Tree’s shares saw their price fluctuate significantly in the market volatility which characterised much of the second half of 2018. However, this did not impact healthy dividends and the firm’s strengthening global distribution networks mean it is well-positioned for sustainable long-term growth. Overall, the company is a good example of how Claverhouse’s investment flexibility can make the most of high-potential opportunities outside the FTSE100.

‘King of trainers’ proves a good fit: JD Sports

JD Sports Fashion plc has also proven to be good value for the trust. Strong relationships with key sportswear brands are supporting rapid global growth, with the company boasting 1474 shops spread across 16 markets worldwide. The brand lives up to its promise as the ‘King of Trainers’ thanks to its ability to efficiently meet consumer demand for the latest big-name releases and to showcase them in the right environment.

Having suffered from the same market volatility as other UK equities in the last quarter of 2018, JD Sports’ shares have enjoyed a fairly steady climb so far in 2019, with a recent cash offer for rival Footasylum plc providing an additional reason to feel positive about the firm’s prospects.

Looking ahead

While these success stories offer plenty to feel good about, it would be to remiss to ignore the potential impact of wider macro events. After Brexit, the biggest potential disruptor over the coming months will undoubtedly be whether the US-China trade war escalates or not.

Our current house view at Claverhouse is that even though global growth remains fairly strong, a more balanced portfolio probably makes more sense than has been the case for most of the last decade.

JPMorgan Claverhouse Investment Trust plc
Investment Objective

The Company aims to provide a combination of capital and income growth from a portfolio consisting mostly of companies listed on the London Stock Exchange. The Company’s portfolio consists typically between 60 and 80 individual equities in which the Manager has high conviction. The Company has the ability to use borrowing to gear the portfolio within the range of 5% net cash to 20% geared in normal market conditions.

Risk profile
  • Where permitted, a Company may invest in other investment funds that utilise gearing (borrowing) which will exaggerate market movements both up and down.
  • This Company may use derivatives for investment purposes or for efficient portfolio management.
  • 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, or fluctuate in response to the performance of individual companies and general market conditions.
  • This Company may utilise gearing (borrowing) which will exaggerate market movements both up and down.
  • This Company may also invest in smaller companies which may increase its risk profile.
  • The share price may trade at a discount to the Net Asset Value of the Company.
  • The single market in which the Company primarily invests, in this case the UK, may be subject to particular political and economic risks and, as a result, the Company may be more volatile than more broadly diversified companies.
  • Where permitted, a Company may invest in other investment funds that utilise gearing (borrowing) which will exaggerate market movements both up and down.
Quarterly rolling 12 months – as of 31/03/2019
  2014/2015 2015/2016 2016/2017 2017/2018 2018/2019
Share price 5.03% -7.36% 26.16% 9.63% 5.06%
NAV 6.32% -3.25% 22.97% 2.67% 4.91%
Benchmark 6.57% -3.92% 21.92% 1.21% 6.31%

Source: J.P. Morgan Asset Management/Morningstar. Net asset value performance data has been calculated on a NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP.

Past performance is not a guide to current and future performance.

NAV is the cum income NAV with debt at fair value, diluted for treasury and/or subscription shares if applicable, with any income reinvested. Share price performance figures are calculated on a mid market basis in GBP with income reinvested on the ex-dividend date. The performance of the company's portfolio, or NAV performance, is not the same as share price performance and shareholders may not realise returns which are the same as NAV performance. Indices do not include fees or operating expenses and you cannot invest in them.

1 Bloomberg, MSCI/FTSE* indices at 24/01/19, Payout=P/E*DY
2 J.P. Morgan Asset Management, May 2019
3 This Is Money, 04/03/19
4 Shares Magazine, 18/03/19

JPMorgan Claverhouse Investment Trust plc

Important information

This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a 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 products or underlying overseas investments. Past performance and yield are not reliable indicators of current and future results. 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 products, 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. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. Investment is subject to documentation. The Investor Disclosure Document, Key Features and Terms and Conditions and Key Information Document can be obtained free of charge from JPMorgan Funds Limited or www.jpmam.co.uk/investmenttrust. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP. 0903c02a82598067