Page 18 - DIY Investor Magazine | Issue 30

• More corporate activity: Smaller companies are more
likely to be acquired than larger companies, providing
an additional source of investor returns. Over the years
we have owned a number of companies that have been acquired including Bulgari, Tag Heuer, Jazztel, Moleskine, Altran, Grandvision, and Dialog Semiconductor. •
• IPOs: When companies first list on the stock market they tend to be smaller companies and this provides a constant stream of new and exciting investment opportunities for the trust.
• Greater exposure to stock-specific returns: Relative to larger companies, investing in smaller companies provides greater exposure to stock-specific factors and less to general macro-economic conditions.
As a result, we believe the JPMorgan European Discovery Trust plc provides a greater ability to generate alpha through stock picking. This is especially true in periods of high volatility as the disconnect between share prices and intrinsic value can grow significantly.
International diversification: The ability to add value through stock picking is further enhanced by the diversified revenue exposure of Europe’s smaller and under explored companies. A significant proportion of small cap revenues comes from North America and emerging markets including China. With the majority of revenues generated outside the European Union, the country in which a company is listed has minimal impact on its long term growth potential.
MSCI EUROPE SMALL CAP INDEX REVENUE EXPOSURE (%)
Source: FactSet and J.P. Morgan Asset Management. As at 30 September 2020.
• Valuation discount: The significant market correction caused by the Covid-19 pandemic created the opportunity to uncover many exceptional companies with solid business models that were trading on very attractive valuations. The opportunities created have reinforced the quality of the European Discovery portfolio.
A FUND THAT’S FOCUSED ON EXCITING IDEAS
The JPMorgan European Discovery Trust plc operates in inefficient markets where active stock picking is essential. This is the essence of our ‘Discovery’ strategy: the managers constantly scour Europe to uncover great investment opportunities, using an investment approach that combines the best of fundamental research and the best of quantitative analysis.
Company meetings and engagement on environmental, social and governance issues are a key part of our research.
‘AN INVESTMENT APPROACH THAT COMBINES THE BEST OF FUNDAMENTAL RESEARCH AND THE BEST OF QUANTITATIVE ANALYSIS’
The aim is to uncover well managed stocks that are at an early stage in their development, so we can share fully in their future growth.
Currently, the trust’s managers are finding particularly exciting opportunities in the three global trends that have been most clearly highlighted by the global pandemic: health and wellness, technology and tackling climate change.
DIY Investor Magazine | Sept 2021 18