Could benefit from an acceleration in US earnings growth: JPMorgan American

JAM could benefit from an acceleration in US earnings growth…by Jean-Baptiste Andrieux

Overview

This trust has been awarded a rating by Kepler Trust Intelligence for growth… Find out more

JPMorgan American (JAM) provides core exposure to the US equity market through a concentrated Portfolio of c. 40 stocks, including a modest allocation to smaller companies. The portfolio is constructed on a bottom-up basis, with half of the holdings selected by dedicated growth portfolio managers and the other half by value managers, providing a balance across investment factors. This approach has delivered strong returns over the past five years, with JAM comfortably Outperforming the S&P 500 Index on both a NAV and share price basis.

The Management team expect US earnings growth to accelerate in 2026 and to broaden beyond the Magnificent Seven. This outlook is arguably reflected in the portfolio positioning, with stocks such as Apple, NVIDIA and Alphabet among the largest underweight positions, and information technology representing JAM’s largest sector underweight. In contrast, the financials, consumer discretionary, and energy sectors currently are the largest overweight allocations.

Notably, two consumer discretionary stocks – McDonald’s and TJX – were added to the portfolio in the trust’s last financial year (ended 31/12/2024). The managers view McDonald’s as well placed to deliver consistent long-term returns, thanks to its focus on value, menu innovation, and digital capabilities. Meanwhile, they expect TJX to continue gaining market share from traditional department stores as shoppers have become increasingly price sensitive.

At the time of writing, JAM was trading at a 3.6% Discount – slightly wider than its five-year average of 2.9% – while Gearing stood at c. 5%, broadly in line with the tactical level set by the board. The trust paid a Dividend of 11p in its most recent financial year, resulting in a historic yield of c. 1%.

Analyst’s View

In our view, JAM offers strong core exposure to the US equity market, providing a blend of complementary investment styles alongside an allocation to smaller companies – resulting in broad coverage across the entire market-cap spectrum. In addition, we believe that the large team of seasoned research analysts supporting the managers represent a hard-to-replicate asset that may offer the strategy a competitive edge over peers with fewer resources.

We would argue that JAM’s investment approach has demonstrated its merits, with the trust outperforming the S&P 500 Index – a notoriously difficult benchmark to beat – over the past five years. While market conditions have been challenging over the past 12 months, JAM delivered a NAV return not far off that of its benchmark, which we believe reflects the consistency of the strategy.

Given its performance track record and diversification across investment factors, sectors, and market-cap segments, we believe JAM could be a compelling option for gaining exposure to the superior earnings growth potential of the US equity market. Indeed, consensus forecasts suggest that US equities could deliver stronger earnings growth than other major developed markets through to the end of 2027. That said, we would also note that US politics has been erratic under the new administration, contributing to – and potentially continuing to cause – higher market volatility.

Finally, the portfolio is underweight in tech mega-caps and overweight in sectors such as financials, consumer discretionary, and energy. As such, JAM could be well positioned to benefit if US market returns begin to broaden out.

Bull

• Offers comprehensive exposure to US equities
• Track record of outperformance
• US equities are forecast to deliver higher earnings growth than other major developed markets over the next two years

Bear

• US politics have been unstable under the new administration, resulting in heightened market volatility
• US equities are expensive relative to their own history and other major equity markets
• There have been significant changes to the management team since 2024, although the strategy has remained unchanged

See the full research into JAM here >

_{Disclosure – Non-Independent Marketing Communication. This is a non-independent marketing communication commissioned by JPMorgan American. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.}