Jupiter US Smaller Companies has published results for the year ended 30 June 2016. The NAV per share increased by 8.7% to 787.3p in the twelve months to 30 June 2016. This compared to a gain of 8.1% in the benchmark, the sterling adjusted Russell 2000 Index. In dollar terms, the Russell 2000 Index of smaller companies lost 8.1% and the Standard & Poor’s 500 Index gained 1.7%. The more technology oriented NASDAQ Composite Index declined by 2.9%. The US dollar gained 17.7% in the year. The price of the shares rose by 5.4% to 698p as the discount widened to 11.3% at the end of the period compared to 8.6% a year earlier.
The two best contributions to performance came from takeovers: IPC Healthcare accepted a bid from Team Health, a health care services outsourcing company; and Monarch Financial agreed to a takeover by its larger neighbour, Towne Bank, making the combined entity the largest bank in the Hampton Roads area of Virginia. Other strong contributions came from the following: Sanderson Farms (a chicken producer) in which shares recovered strongly after purchase this year as margins began to recover; Acxiom (consumer database marketing) which saw a return to growth in its legacy off-line data business; finally HMS Holdings (health care audit and cost analytics), which fought off new competition in its Medicaid business and experienced good growth in its developing commercial operations.
Poor contributions came mainly from turnarounds that struggled in the face of headwinds. Pernix Therapeutics (an acquirer and marketer of niche branded drugs), one of those turnarounds, saw disappointing results from the relaunch of a migraine drug and was sold. CAI International (a lessor of shipping containers), bought as a recovery stock, was hit by a “perfect storm”: falling steel prices, which drive the marginal price of containers and lease rates, led to pressure on prices just as weakening international trade hurt container utilisation and the market worried about stocks with higher financial leverage. It was sold on a bounce. Sotheby’s, another turnaround, was hit by declining art sales and was sold: the manager takes the view that turnarounds require a following wind to be successful. Kindred Care (a provider of a full range of health care services), a turnaround, faced cuts in hospital reimbursement. As the shares are quite inexpensive and home care is enjoying good growth, it was retained. DeVry Education (post-secondary education) was another turnaround where management were trying to diversify away from the highly competitive university business in the face of declining student numbers. Last year it faced two blows: a lawsuit from the Federal Trade Commission and rule changes by the Department of Education that together have the potential to bankrupt it, and it was sold.
There were four bids this year: in addition to the two mentioned above, C1 Financial agreed to a bid from Bank of the Ozarks. The Andersons (diversified agri-business) received an unsolicited bid from a Special Purpose Acquisition Company.
JUS : Bids help Jupiter US Smaller outperform