JPMorgan American (JAM ) stands out for successfully keeping up with the Magnificent Seven, propelling retiring manager Jonathon Simon to a Citywire AA rating in December. 

The mega-cap stocks that make up the Magnificent Seven – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – were responsible for more than half of the S&P 500’s gain in 2024.

They also make up a significant portion of the top 10 holdings in the £2bn trust that Simon co-manages, with Microsoft in the top spot at 6.2% of the portfolio, followed by Nvidia (6%), Amazon (5.5%), Facebook-owner Meta (4.7%), and Apple (3.6%).

The gamble on the tech giants more than paid off as the hype around AI drove valuations higher, lifting the net asset value (NAV) of the fund 38.3% over the year to the end of November 2024. In turn, this drove three-year NAV returns to 56.1%, making it the best-performing trust in its Equity IT – North America sector over the period and earning Simon his AA rating. 

The underlying returns likewise beat 44% for the S&P 500, in sterling terms, over the same period.

The trust also picked up the award for best North American trust at the 2024 Citywire Investment Trust Awards. 

JAM co-manager Jack Caffrey, who is taking over as lead manager of the ‘value’ sleeve of the portfolio when Simon retires early this year, said that while the Magnificent Seven drove the market in the first half of 2024, the latter part of the year saw returns broaden to other sectors.

The managers continue to ‘uncover differentiated opportunities outside the Magnificent Seven’, including manufacturing and power infrastructure, weight-loss drugs, and robotic surgery.

‘Our conviction remains in the secular growth opportunity within AI, we also invest in the lesser-known companies enabling the AI boom,’ said Caffrey in a recent outlook.

‘The infrastructure required to support generative AI, such as data centres, provides opportunities for investors. For instance, we hold positions in Trane Technologies, which specialises in building systems to cool the vast data centres essential for AI operations.’

On the value side of the portfolio, Caffrey flagged fast-food behemoth McDonald’s as ‘well positioned’ due to its ‘iconic, quintessential America brand’ and ‘very defensive’ business model.

‘Nowhere is this better exemplified than the fact that a third of the US population eats there every week, putting the value and consistency that the brand provides on a pedestal that is borne out through sales,’ he said.

The ‘growth’ half of JAM’s portfolio is managed by Felise Agranoff and Eric Ghernati, though neither has yet gained ratings. 

European duo defy tough markets

Janus Henderson duo Ollie Beckett and Rory Stokes earned themselves Citywire A ratings in December despite European stock markets being set back by economic woes and the threat of trade tariffs from US president-elect Donald Trump.

The managers kept their £736m European Smaller Company (ESCT ) on track over the year to the end of November, growing the NAV by 6.3%. Although the portfolio was flat over three years, that actually put the duo in top spot in the Equity IT European Smaller Companies sector over that time, during a tough period for the asset class. 

In the latest factsheet, Beckett and Stokes pointed out that the cyclical characteristics of European small-caps mean ‘they tend to be more dependent on economic growth to do well’.

The pair own a number of cyclical stocks and said that they were wrong when they ‘believed that we had reached the point of maximum pain’ for this part of the stock market.

‘Although it is clear we were early on this call, we believe these stocks still look attractive,’ they said. ‘The latest IFO business climate survey suggests signs of a recovery, and we expect falling interest rates will combine with Chinese stimulus measures to accelerate global economic growth.’

The trust is not only battling poor market sentiment but also New York hedge fund Saba Capital. ESCT is one of seven trusts requisitioned by the activist investor before Christmas in a bid to oust the boards, which Saba says have overseen an extended period of poor performance – an assertion not really borne out by the data – and a persistent discount.