JPMorgan Mid Cap Investment Trust (JMF) announced its half year results to June 30 2023. The NAV total return for the period was +7.5%, ahead of the benchmark FTSE 250 Index (excluding investment trusts) return of +3.0%. The company’s share price discount to NAV widened marginally over the year resulting in a share price total return of +6.4%.
Commenting on the performance, Chairman John Evans noted:
“It is encouraging to be able to report on a year of positive performance in both absolute and relative terms after the difficult year to June 2022. The positive relative performance was driven almost entirely by good stock selection by your managers. Share buyback activity in the period also assisted performance.”
Regarding the outlook for the company, he continued:
“The positive returns for the year, described above, were generated against an almost uniformly negative background for the UK, and in particular, domestically focused UK equities. In many respects the FTSE 250 has been in the eye of the storm of negativity directed at the UK stock market over the past 12 months.
“This has been reflected in a steady reduction in the allocations to UK equities by institutional and private investors alike. Indeed in the year to 30th June 2023 the UK All Company sector of Investment Trusts (in which your company resides) saw the largest net selling of any investment trust sector. Hardly a resounding vote of confidence in your asset class.
“The reasons are not hard to find. Inflation has proved to be higher and more resilient at the higher levels than anticipated. The Bank of England’s blunt response of 14 interest rate increases has been hard-hitting, but perhaps there are now signs that this process is at an end. In a consumer orientated economy, such attempts to reduce inflation by squeezing disposable income has contributed to a negative overview for UK equities.
“Having been one of the best performing indices in the world for many years, the FTSE 250 Index has stumbled against such a difficult backdrop and produced poor performance versus both larger UK companies and other markets, particularly the US equity market. A dialogue developed which questioned the very future of the market for mid and small cap companies in the UK with competition for capital from private equity and competition for new listings from other markets, notably the US where higher valuations are on offer. However, there are signs of positive actions and policy changes arising from this debate and the board welcomes proposed reforms to support UK capital markets.
“Right now the FTSE 250 Index is trading at a valuation level rarely seen in recent years. Logic suggests that buying an out of favour asset at a discounted valuation should be a good starting point for investment returns. This is particularly the case if the earnings progression of the assets is maintained.
“Currently your portfolio managers are optimistic and seeing opportunities to invest in good businesses at very attractive valuations. Gearing in the company sits near 10%, towards the upper end of recent levels confirming their optimism and commitment, which is shared by your Board.”
JMF : Strong rebound for JPMorgan Mid Cap