It was a busy lockdown for the manager of investment trust Jupiter US Smaller Companies as he sought to protect the fund from pandemic fallout.
Although Robert Siddles quickly managed to offload a number of holdings whose businesses he thought would suffer from a prolonged lockdown, the trust’s share price still fell sharply in March.
This precipitous correction is reflected in the short-term performance numbers with losses of 9 per cent recorded over the past year.
‘It’s been a tough time,’ admits Siddles who has managed the £104million fund since 2001. ‘The trust was hit hard in March and April, but the share price has since improved.
Yes, the performance numbers do not look good when compared with the price gains registered by some big US technology stocks. But markets move in cycles and the out-performance of the technology companies will not go on forever.’
Siddles believes the shock to the market, triggered by the pandemic, persuaded many investors to opt for the ‘security’ of leading stock-market-listed US companies. But as the US economy recovers, he is confident that investors will ‘go back into the small US company arena’.
Stocks that were jettisoned as the pandemic struck include Allegiant Travel Company and real estate specialist Colliers International.
‘Basically, I sold those companies where demand for their services would be badly hit,’ Siddles says.
New stakes were taken in companies with an interest in ‘digital transformation’ – the likes of digital consultant Perficient and IT services company Grid Dynamics. The result is a 39-strong portfolio.
Siddles describes himself as a stock-picker and a ‘value’ investor, constantly searching for businesses where the share price has fallen – but which he believes are ‘natural winners’.
‘When I see a stock’s price fall, I will dig a bit deeper,’ he says. ‘I assess whether the share price correction is justified or whether there is shareholder value in the business that others don’t see.
‘Ultimately, I’m looking for undervalued companies with strong business franchises, that are generating lots of cash, and where management are shareholders. A combination of these attributes will get me excited.’
While his judgment as a stock-picker is the main driver behind the trust’s long-term performance, he is buoyed by a positive outlook for the stock market – a result, he says, of improving business confidence in the United States and the Federal Reserve’s continued support for the economy.
Siddles has managed the trust for nearly 20 years although when he took up the reins in 2001, he was working for rival investment house F&C and the trust was called F&C US Smaller Companies.
When he moved to Jupiter in 2014, the trust’s independent board kept him as the investment manager, hence the trust’s re-labelling.
Over the years, Siddles has somewhat adapted his management style. He now holds his investment winners for longer – previously he would already have sold most of his current top 10 holdings – and runs a more concentrated portfolio than previously.
Despite this change in tack, a number of US smaller company funds have delivered stronger returns, both over the short and long term. They include JPM US Small Cap Growth and Artemis US Smaller Companies.
Scrutineer FundCalibre labels the Artemis fund as one of two ‘elite’ US smaller companies funds, the other being managed by Miton. Annual charges on the Jupiter trust are just under 1 per cent.