JPMorgan Global Growth & Income (JGGI)
30/09/2024
Results analysis from Kepler Trust
Intelligence
JPMorgan Global Growth &
Income (JGGI) has released its financial results for the year
ending 30/06/2024. The trust delivered NAV total returns of 28.0%
and a share price total return of 28.8%, outperforming its
benchmark, the MSCI AC World Index, which returned 20.1%.
Outperformance stemmed from three key sources: owning high-growth
stocks; stocks growing their profitability; and strong stock
selection from targeting high-quality, attractively valued
businesses. Unsurprisingly, given the strong performance, demand
for the shares was high.
The trust traded at a premium
for most of the year under review, issuing a total of 71,747,847
shares to meet investor demand. This included 6,472,847 new shares
issued in connection with a placing and retail offer. The board is
seeking permission to be able to place up to another 150m shares.
Additionally, as part of the combination with JPMorgan Multi-Asset
Growth & Income (MATE), completed in March 2024, the board
issued 13,546,292 shares in exchange for substantially all of the
net assets of MATE. Despite strong demand, the trust briefly traded
at a discount for one week in June due to the liquidation of a fund
of investment trusts, which had a large holding in JGGI. In
response, the board repurchased 900,000 shares at an average 2.4%
discount to support the share price. At the time of writing, it
trades at par.
Kepler
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These are strong results for
JPMorgan Global Growth & Income (JGGI), which in short
highlight a 23.6% dividend increase, the successful completion of
its combination with MATE and sizeable share issuance to meet
investor demand, as the trust traded at a premium for most of
financial year. Excess returns during the latest financial year
were driven by strong stock selection, contributing 7.1% to NAV
total returns. Notably, semiconductor giants NVIDIA and TSMC saw
their share prices increase by 190% and 70%, respectively, fuelled
by the rising demand for AI technology and the advanced chips
powering it.
Although semiconductors and
other growth themes remain important in the portfolio, the managers
note their concerns about the near-term economic and corporate
outlook, pointing to the early warning signs of a potential
recession in the US. A key area of vulnerability lies in corporate
profits, particularly within low-growth, cyclical sectors like US
banks, commodity-exposed companies, and industrial cyclicals, where
they argue earnings have been above trend. Consequently, the
managers have adjusted the portfolio to mitigate some of these
risks, and built-up positions in consumer defensive stocks where
they think the valuations are as attractive as they have been for
15 years, increasing the portfolio's exposure to defensive stocks
like Swiss food and beverage company Nestlé and Dutch brewer
Heineken, expecting performance to be resilient, even if growth
slows.
The extent of the
outperformance delivered, despite challenges like geopolitical
tensions, COVID-19, spiralling inflation, and sharp style
rotations, is impressive. However, it's important to note that
JGGI's exposure to high-growth and defensive sectors means that the
outperformance of cyclical sensitive sectors or lower-quality
stocks would drag on relative returns.
From a dividend perspective,
a key attraction is the board's ability to draw on its
distributable reserves to support year-on-year dividend increase.
This affords the managers greater flexibility to invest not only in
high dividend-paying companies but also those paying little to no
dividends. This combination has led to it offering investors a
growing dividend and a premium yield to the market and sector
average, whilst also maintaining significant exposure to
high-growth technology names, not present in the more traditional
equity income strategies.
Overall, the managers' track
record of stock selection, proven to consistently deliver alpha
even during the stylistic biases driving markets, a strong total
return profile supporting dividend growth and its very low charges,
make it a compelling choice for investors seeking a core global
equity portfolio, or enhanced income and capital
growth.
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