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This is a marketing communication
The combination of growth and value research teams provides JPMorgan American Investment Trust’s portfolio managers with broad insights into how technological innovation may impact companies across sectors.
Technology is an important sector in the US equity market, accounting for roughly 29% of the S&P 500 index. Investor excitement around technology trends, such as the growth of artificial intelligence (AI), has helped to power the US market to record highs again this year.
Yet companies in other sectors, such as communications services and industrials, are also benefiting from exposure to the same growth drivers. JPMorgan American Investment Trust plc (JAM) is well positioned to find these businesses thanks to its ability to combine the research insights from J.P. Morgan Asset Management’s US growth and US value investment teams. This research can help to identify growth opportunities in a typical value sector, such as industrials, and consider valuation in a higher-growth sector, like technology.
Early in 2023, JAM’s portfolio was positioned to benefit from spending on AI, which appeared to have been underestimated by the market, with the portfolio profiting from significant exposure to technology stocks. However, with many of these stocks now trading at higher valuations, on average, a more selective approach is now required as company fundamentals will likely drive performance.
Roughly 25% of the portfolio is still invested in technology stocks—the biggest sector allocation on an absolute basis, but now the biggest underweight in relative terms after positions had been trimmed. One of those positions to have been reduced is NVIDIA, a leading developer of graphic processing units (GPUs), a type of semiconductor chip needed to support AI. While the company is expected to maintain a strong market position, demand from cloud service providers is too high for them to rely on NVIDIA alone.
Capital is therefore being allocated to some less-appreciated companies in the AI value chain. JAM owns shares of Advanced Micro Devices, another semiconductor company that is emerging as a competitor to NVIDIA on the GPU hardware side. A position in Broadcom, a leader in semiconductor infrastructure technology, is also expected to benefit as companies such as Google and Amazon develop their own chip infrastructure. JAM also has a position in Lam Research, a semiconductor manufacturer capable of producing the memory-intensive chips needed for AI.
Many technology-related companies are in the communications services sector, including Google, a position that has recently been trimmed, and Meta, where a large overweight has been maintained. Meta invested early in AI and video, has caught up to Tik Tok, an emerging competitor, and reaccelerated engagement in its core platforms. The company is benefiting as consumer brands increase spending on digital advertising and realise that they can target their audiences very effectively on Meta, generating the highest returns on advertising dollars.
Global digitisation, rapidly rising data workloads and AI mean that significant investment is needed in the infrastructure needed to support data centres and their power intensity. US power demand hasn’t grown much for decades but is now set to increase exponentially, meaning utilities will have to invest in upgrading the power grid. However, the market may be underestimating the magnitude and duration of the power infrastructure spending cycle.
JAM is investing in companies in the industrials sector that are well-positioned to benefit from this infrastructure spending. For example, Trane technologies, which is one of the largest providers of heating, ventilation and air conditioning (HVAC) technologies, has a focus on energy-efficient technologies and a market-leading position in cooling data centres. Also, Quanta services, which is a leader in transmission and distribution infrastructure, with a 60% market share of large transmission projects.
While the technology sector gets a lot of attention, the portfolio’s second largest sector weighting is in financials. And in contrast to technology, this is JAM’s biggest overweight sector position, offering access to a number of high quality, attractively valued companies.
Exposure has also been increased to the US consumer. After recent underperformance, some consumer staples companies now trade at more attractive valuations, allowing some high-quality franchises to be added to the portfolio.
An addition on the consumer discretionary side has been Ross Stores, a leading off-price retailer that buys excess inventory in the system and sells it at a discount. Ross is expected to benefit in the near term as consumers focus on value; longer term, the company has the opportunity to take market share from department stores. Ross is small relative to the size of the department store market, creating a strong growth opportunity.
With its focus on identifying high quality, durable franchises across sectors, backed by the expertise of dedicated US growth and US value investment teams, JAM’s 40-stock portfolio offers attractive opportunities for investors looking to gain access to the long-term growth potential of the US stock market.
Summary Risk Indicator
The risk indicator assumes you keep the product for 5 year(s). The risk of the product may be significantly higher if held for less than the recommended holding period.
Investment objective
The Company aims to achieve capital growth from North American investments by outperformance of the Company's benchmark, the S&P500 Index, with net dividends reinvested, expressed in sterling terms. The Company emphasises capital growth rather than income and when appropriate may have exposure to smaller capitalisation companies. The Company's gearing policy is to operate within a range of 5% net cash to 20% geared in normal market conditions. Gearing may magnify gains or losses experienced by the Company.
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 Annual Reports and Financial Statements, AIFMD art. 23 Investor Disclosure Document and PRIIPs Key Information Document can be obtained in English from JPMorgan Funds Limited or at 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.
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