DIY Investor Magazine
| August 2017
8
HOW INVESTMENT TRUSTS CAN GIVE
YOU EXPOSURE TO CAPITAL GROWTH
IN THE WORLD’S BIGGEST ECONOMY
HOW TO GAIN EXPOSURE TO SOME OF THE BIGGEST GLOBAL BRANDS AS WELL AS DYNAMIC SMALLER
COMPANIES BY PROFESSIONAL STOCK SELECTION IN THE LARGEST ECONOMY IN THE WORLD.
JPMorgan American Investment Trust plc offers a
diversified and professionally-managed portfolio of large
and small companies, selected in pursuit of capital
growth. These include some of the best-known brands
in the world, such as Apple, McDonald’s and Microsoft.
Following the election of Donald Trump as President,
some American stock markets have hit all-time highs
and may have further to go if pledges to lower corporate
tax rates cause companies to repatriate profits currently
held outside America. Despite trading near all-time
highs, shares in this large investment trust can still be
bought at a discount to their net asset value.
MAKING GREAT GAINS IN AMERICA AGAIN
Promises of tax cuts, deregulation and extra spending
on infrastructure have helped the Standard & Poor’s
500 index, a broad measure of the American stock
market, to hit new all-time highs in 2017. While there is
no guarantee this will continue – and share prices can
fall without warning – the recovery is not solely based
on Presidential promises. Stock market valuations
have been supported by the best corporate earnings
figures seen in five years. The S&P 500 has delivered
its first double-digit increase in quarterly earnings, year
over year, since the fourth quarter of 2011. Blue-chip
earnings rose 13.3 per cent a share in the first quarter of
2017.
Pricing power for companies has also rebounded with
quarterly revenues year over year showing a robust rise
of 7.8 per cent — the fastest pace of top-line growth
since the fourth quarter of 2011. So there are reasons
to hope that the global credit crisis which began in
America – when the Wall Street bank Lehman Brothers
went bust in 2008 – may also have ended there, as
recovery and growth replace recession.
TAKING A SHINE TO APPLE
America is the home to some of the biggest brands in
the world – and some of these companies have strong
balance sheets with good prospects of further growth.
For example, the technology giant Apple is the most
valuable company in the world – as measured by the
total value of its shares, which hit 800bn USD in May but
strong revenues also recently enabled it to become the
biggest dividend payer in the world.
In what might be seen as an example of new technology
overtaking older businesses, Apple increased its
annual distribution to shareholders to 13.2bn USD
and displaced the oil giant ExxonMobil as the biggest
dividend payer in the world. Strong earnings are
supporting research and development of new products
and services as diverse as self-driving cars and
augmented reality which could produce further gains for
shareholders.
In another example of how information technology has
become an increasingly important part of the modern
economy, the software giant Microsoft is the third
biggest dividend payer in the S&P, distributing just over
12bn USD a year. Both Apple and Microsoft are among
the top 10 holdings in JPMorgan American Investment
Trust.
BIG BURGER CHAIN GETS BIGGER
Big-ticket or expensive items are not the only factors
driving the recovery in American stock markets. People
will always want to eat and modern lifestyles mean many
are short of time but have the cash to pay for fast food.
McDonald’s is the biggest burger chain in the world
and well-placed to benefit from these trends – which
are being accelerated by recovery in emerging markets,
where demand is rising for affordable treats. Successful
price promotions such as 1 USD soft drinks and 2
USD McCafes boosted global like-for-like sales by 4%
during the first three months of 2017, beating Wall Street
estimates for a 1.1 per cent rise.
