Portfolio Manager, Georgina Brittain shares her thoughts below
JPMorgan UK Small Cap Growth & Income plc (JUGI) aims to achieve capital growth from UK listed smaller companies over the longer term. Thirty years of experience investing in UK equities has taught the Trust’s Portfolio Manager, Georgina Brittain, some valuable lessons that have served its shareholders extremely well, as she shares below. JUGI has outperformed its benchmark on an annualised basis over three, five and ten year periods to 31st August 2025¹.
Lesson 1: Preparation is important ahead of big market events
It is not always possible to anticipate major, market-moving events. For example, the rapid spread of the Covid-2019 pandemic took investors, as well as governments and health services, completely by surprise. However, the timings of other potentially significant events such as Brexit and annual Budget are known well in advance. And one lesson Brittain has learned over time is that in such cases, it pays to make thorough preparations, by considering possible scenarios and their potential impact on share prices. And because such events often generate volatility, the manager tends to stockpile cash ahead of time, to take advantage of any investment opportunities that may emerge from market turmoil.
With the November Budget fast approaching, and speculation about possible tax increases rife, Brittain and co-manager Katen Patel are once again putting this lesson into practice – assessing possible winners and losers and considering how to turn developments to shareholders’ advantage.
Lesson 2: Cut losses and let winners run
The old adage ‘cut losses and let winners run’ may be a familiar one, but for Brittain, it is salient advice that has enhanced the Trust’s returns over time. Despite the best fundamental analysis, sometimes investments do not live up to expectations. The key is to recognise such situations, sell the troubled stock quickly, to cauterise any losses, and put the funds to profitable use elsewhere in the portfolio.
Lesson 3: A rising tide does not necessarily raise all boats
Another notion familiar to investors is that ‘a rising tide raises all boats’. However, in this case, Brittain begs to disagree. In her view, even when economic conditions are favourable, companies still ‘have to do everything right, all the time’ to justify their place in her portfolio. And this is even truer when the tide is receding, and trading conditions are tough, as they have been for several years in the UK retail sector. She cites the example of consumer electronics company, Curry’s. This company has a very strong, long-established brand, but despite this, excessive debt and a pension issue prompted Brittain to sell the stock in 2022. By the end of that year, the stock had dropped to approximately one third of its 2021 highs. However, once Curry’s addressed its problems, Brittain re-purchased the stock, which has since returned to its 2021 levels, in defiance of the general doom and gloom across the sector.
Lesson 4: Management quality is key
Brittain and Patel target quality businesses. In addition to standard quality metrics such as return on invested capital (ROIC), Brittain places great store in the quality of a company’s management as another key determinant of its long-term success. In her experience, the best CEOs may not be the most charismatic, but they are the ones who fulfil their commitments, provide straight answers and steer their businesses wisely. And the good news is that Brittain believes the calibre of UK company managers has improved significantly during her time in this market.
Lesson 5: Pay attention to free cash flow
A stock’s free cash flow yield is an important value metric for Brittain. In her view, a business is only worth owning if it is producing free cash flow, because free cash flow gives managers valuable options – either to invest in future growth, or to enhance shareholder returns via share buybacks or higher dividends.
Brittain believes market conditions are improving
As well as providing her with useful investment insights, Brittain’s long participation in the UK market has honed her ability to assess its mood and future direction. There are always risks and uncertainties related to developments both at home and in international markets. In the UK, attention is currently focused on the possible implications of the forthcoming Budget for households and businesses, while US trade policy has raised fears of recession and higher inflation, in the US and globally.
However, in Brittain’s opinion, despite these and other ‘known unknowns’, the outlook for UK equities is looking up. One sign of improvement is a pick-up in pre-IPO activity. Brittain and Patel have recently participated in an increasing number of ‘early look’ meetings with companies considering public listings. These meetings are intended to gauge potential market interest and garner feedback from potential investors. Brittain believes it is only a matter of time before these companies go to market. In her view, it is most likely that IPO activity will rise in the first half of 2026, once uncertainties around the UK Budget dissipate.
Furthermore, UK equities are trading at historically low valuations which are finally attracting investors’ attention. This is most evident in the surge in M&A activity, especially in the mid and small cap sector, which began in 2023 and shows no signs of abating. And takeover targets are being acquired at very significant, 50-100%, premiums to their share price². For Brittain, such premiums are ‘a flashing light’ that share prices are too low, and overdue for a re-rating.
JUGI is already benefiting from this takeover activity. Deals involving three portfolio holdings - Renold, an engineering business supplying the power transmission industry, and two financial companies, Alpha Group International, a foreign exchange company, and Just Group, a retirement services company - are currently being finalised. Each of these businesses is being acquired at share price premiums of more than 50%³. And the Trust’s manager expects other portfolio holdings to attract equally profitable bids as this trend continues.
If these recent developments are any indication, it seems there may be better times ahead for UK equities. And shareholders in JPMorgan UK Small Cap Growth & Income can expect the continued support of its seasoned portfolio management team, who remain focused on navigating opportunities and risks in the current market landscape.
The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.