JPMorgan Global Growth and Income (JGGI) has released the annual results for its financial year ending 30 June 2023.
- JGGI generated a NAV total return of 19.1% and share price total return of 22.2%, easily outperforming its benchmark, the MSCI ACWI, which generated a 11.3% return for the same period.
- JGGI’s outperformance was broad based, with 14 of its 19 invested sectors positively contributing to performance. Stock selection was the largest driver of performance, contributing 3.4% to JGGI’s outperformance.
- The financial year just gone represented the first post-merger period for JGGI. During the year it successfully competed the combinations of JGGI with the Scottish Investment Trust and JPMorgan Elect. The combinations have listed JGGI’s market cap to over £1.8bn. This has not only reduced JGGI’s management fee but also doubled its daily liquidity.
- JGGI welcomed James Cook to its portfolio management team, replacing Rajesh Tanna, who moved to other investment management roles within JPM.
- JGGI intends to pay a total dividend of 18.44p per share for the coming financial year, in line with its policy of paying out 4% of its NAV each year as a dividend, with the value determined at the end of the preceding financial year. This will be a 8.5% increase on JGGI’s current dividend of 17.00p per share.
- Thanks to the sustained premium JGGI traded on, the board was able to issue 17.9m shares over the year, which is c.4% of the current circulation. JGGI currently trades on a 1.8% premium.
JGI’s manager commented:
“Overall, we are relatively sanguine about the year ahead. While we hope that AI could lead to a technology-led growth opportunity within the broad economy, we see headwinds in the form of: higher interest rates; a depleting consumer cash balance; and record profit margins at risk of returning to pre-pandemic levels. So, while broad market valuations trading slightly above historical averages look neither compelling nor particularly demanding, the scale of potential earnings headwinds means the portfolio is well balanced between cyclical and defensive. In addition, the Company is now broadly ungeared on a net basis. That said, we see plenty of opportunities for stock selection success.
“In terms of our positioning, we continue to deliver a portfolio that we believe offers superior quality of earnings and can outgrow the market at a more attractive free cash flow yield*. The portfolio’s exposure to the highest quality companies in our investment universe is back to its highest level since the team has managed the strategy. After trimming our overweight exposure to these companies in late 2021 on valuation grounds, we have found attractive entry points over the last 12-months to rebuild positions into high-quality, asset-light businesses.
“This year has seen several key themes emerge, some of which we believe will have longevity, while others will be temporary. We see AI as an opportunity that could change the way companies operate over the next decade, from both an efficiency point of view and a quality-of-service perspective, with social media stocks seeing this as a core part of their infrastructure and business. Over the coming year we will undoubtedly see many companies claim to be AI winners, just as we saw many companies claim to be internet winners in the early 2000’s. Our core objective is being able to separate which of these companies will be able to monetise AI from those that will purely implement it without seeing a long-term lift to earnings.
“Over the coming year, there is a reasonable chance many companies will be incorrectly considered as AI winners; however, we believe that our emphasis on the barriers to entry will stand us in good stead in the long term.
“Overall, the portfolio remains exposed to a broad number of attractive structural trends such as the shift in consumer budgets away from physical goods into travel and leisure, the continued growth in cloud computing, the electrification of vehicles, and the expansion of the electric power network. We believe that these changes will drive the future of the global economy and finding stocks that can benefit from them will be key to the continued success of the portfolio.”