TIDMJMF
JPMorgan Mid Cap Invest Trust PLC
12 July 2019
JPMorgan Mid Cap: New research
12/07/19
-- JMF uses quant research and fundamental analysis to take
advantage of investor psychology and market inefficiencies...
Read more
JPMorgan Mid-Cap (JMF) aims to generate long-term capital growth
from UK mid-cap stocks by using quantitative research and
fundamental stock analysis to take advantage of investor psychology
and inefficiencies in the market. The managers, Georgina Brittain
and Katen Patel, believe this approach is perfectly suited to the
mid cap market as it is less well covered by analysts than the
large cap market and is therefore less efficient, meaning that
there are many opportunities to gain an edge with superior
analysis.
The track record of JMF shows the potential in their approach:
over the past five years JMF has generated NAV total returns of
61.2%, compared to just 36.6% for the FTSE 250. The share price has
risen 66.4% over the same period, as the discount has narrowed.
Since 2013, the first full year Georgina was in charge, NAV total
returns have been ahead of the index in four of the six full years,
and in 2019 are so far ahead of the index again. The trust has done
particularly well in the strongest rallies, such as in 2013 and
2017. The two down years were 2016 and 2018, both related to the
Brexit referendum and aftermath.
The trust aims for capital growth, but it does have a
progressive dividend policy, aiming to grow the dividend ahead of
inflation each year. Over the past five years it has comfortably
achieved this, with annualised growth in the payout of 10.2%,
excluding special dividends. The historic yield is 2.5%, again
excluding specials, which by definition may not recur. With
specials included the dividend yield rises to 2.6%.
Georgina and Katen have reduced their gearing since the Brexit
vote, and have been tending to run with a maximum of 5% of NAV in
gearing, in recognition of the risks to the UK economy and currency
from the ongoing Brexit negotiations. They have aimed to ensure the
portfolio is not over-exposed to one outcome from the negotiations
(i.e. a no-deal exit or a smooth transition).
Nevertheless, the sector and trust remain out of favour thanks
to the Brexit issue, with JMF trading on a 12% discount, wider than
the sector average of 9.7% and the trust's one-year average of
7.4%. A change of broker in June 2019 is intended to help support
marketing efforts to narrow the discount, although we understand
that the board's reticence to use buybacks to this end reflects its
belief that while the Brexit negotiations are ongoing, the UK is
likely to remain out of favour.
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