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JPMorgan American Investment Trust plc | JAM

US equities, hand-picked by experts

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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.

Getting more selective in technology holdings

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.

Investing in the power of AI

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.

Offering more than technology exposure

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.