JPMorgan Smaller extends outperformance – JPMorgan Smaller Companies has published results for the year ended 31st July 2020. The NAV return for the period was 3.8%, well ahead of a return of -8.7% for the benchmark, the Numis Smaller Companies plus AIM Index (excluding Investment Companies). The return to shareholders was +3.7%, reflecting a steady discount level over the year as a whole. The trust has continued to outperform since the period end.
Revenue per share fell to 3.80p from 6.33p but the directors are recommending a maintained final dividend of 5.50p per share, supported by revenue reserves.
Extract from the manager’s report
“The key contributors to performance in the year were a number of our largest high conviction holdings. These included Games Workshop, Dunelm, Avon Rubber, Future, Team 17, Codemasters, Softcat and Computacenter. We also benefitted from the take-overs of Eland, EI Group, Huntsworth and more recently RockRose Energy. The main underperformers were those companies perceived by the market to be hard hit by Covid, namely Dart Group, Vistry and OneSavings Bank. We believe the stockmarket has misjudged these companies; we maintain our holdings in all of them, and added to both Dart and Vistry after their shareprice declines.
The impact of Covid on the portfolio was significant in March, as certain sectors such as travel and leisure and retail were dramatic underperformers, and our index fell by almost 24%. In response to the pandemic we made a number of changes to the portfolio. However, key to our approach throughout this turbulent period has been to maintain a balance within the portfolio. We aimed to own both those companies that would not be too hard hit by the lockdown, or indeed might benefit from it, but also those that despite suffering a significant impact in the period we believed to be either extremely oversold and hence very undervalued, or those which we analysed would not only survive, but come out the other side stronger and with better competitive environments.
Further examples of companies where we increased our position as prices fell include Future, Pets at Home and Computacenter. New additions to the portfolio, which should benefit from recent events, included Halfords and Restaurant Group (both very oversold), CMC Markets (a beneficiary of volatile stockmarkets) and the gold producer Centamin. Other new purchases include Premier Foods, Gamma Communications and LSL, the estate agent. We exited a number of holdings including the train operator, Go-Ahead, Greggs, the food-on-the-go outlet, the tour operator On The Beach and TI Fluids, exposed to the automotive market. In the second half of the year we also participated in one IPO, Inspecs, a global manufacturer and distributor of eyewear.”