JPMorgan American Investment Trust plc Annual General Meeting. 13 May 2015

Transcription

1 JPMorgan American Investment Trust plc Annual General Meeting 13 May 2015

2 Agenda Performance Review Current Economic and Market Data Current Asset Allocation and Fund Structure 1

3 2014 Results NAV return % Ordinary share price % S&P 500 Composite Index ( ) 20.4% NAV relative return 0.4% Interim Dividend (Net) payment (October 2013) 4 1.0p Dividend (Net) Payment (May 2014) 4 1.7p Interim Dividend (Net) Payment (October 2014) 1.0p Final Dividend (Net) Proposed Payment (May 2015) 2.25p = 20.4% increase on Source: J.P. Morgan and based on cum income debt at par. 2 Source: Morningstar. 3 Source: Morningstar. The Company s benchmark index is the S&P 500 Index, net of the appropriate withholding tax, expressed in sterling total return terms. 4 The October 2013 and May 2014 dividend amounts have been restated due to the sub-division of each existing ordinary share of 25p into five ordinary shares of 5p each on 8th May

4 Performance Attribution Contributions to Total Returns JPM American Investment Trust plc Contributions To Total Returns Year ended 31 st December 2014 Net Asset Value Total Return (In sterling terms) 20.8% Benchmark Total Return (In sterling terms) 20.4% Excess Return 0.4% Contributions To Total Returns Large Cap Portfolio 1.1% Allocation Effect -0.8% Selection Effect 1.9% Small Cap Portfolio -0.5% Allocation Effect -0.5% Cash -0.2% Gearing 1.5% Cost Of Debt -0.5% Currency Hedge -0.5% Share Issuance 0.2% Management Fee/Expenses -0.6% Performance Fee -0.1% Total 0.4% Source: Wilshire, JPMAM and MorningStar. All figures are on a total return basis. Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark index. 3

5 JPMorgan American Investment Trust: 2014 performance attribution (USD) For the twelve month period ending 31 December 2014 Excludes Cash & Gearing (USD) Attribution Summary 1 Stock: +1.85% Sector: -0.75% Stock attribution (relative to S&P 500) Positive contributors Ending Weight Difference Return Impact Apple 2.40% 40.60% 0.53% Southwest Airlines 0.62% % 0.39% Yahoo 1.06% 44.56% 0.37% Hewlett Packard 1.25% 46.03% 0.34% Amazon* -0.65% % 0.33% Negative contributors Ending Weight Difference Return Impact Peabody Energy* 0.00% % -0.44% Terex* 0.00% % -0.29% Devon Energy 1.09% 0.37% -0.28% General Motors* -0.26% % -0.28% Intel* -0.96% 44.27% -0.24% Sector attribution (relative to S&P 500) 2.2% 0.7% 0.4% 0.3% 0.0% Information Technology Consumer Staples Industrials Telecom Services -0.2% -0.4% -0.6% -0.6% -0.6% Materials Energy Utilities Consumer Discretionary Health Care Financials 1 Attribution breakdown equates to the gross performance of the portfolio. *Indicates stock was not held as of 31 December Source: Wilshire. The portfolio is an actively managed portfolio; holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not positions on behalf of its clients in any or all of the aforementioned securities. 4

6 Four Months to April 2015 Results NAV return % Ordinary share price 2-4.1% S&P 500 Composite Index ( ) 3 3.3% NAV relative return -0.9% 1 Source: J.P. Morgan and based on cum income with debt at par. 2 Source: Morningstar. 3 Source: Morningstar. The Company s benchmark index is the S&P 500 Index, net of the appropriate withholding tax, expressed in sterling total return terms. 5

7 Performance in USD As of 30 April 2015 NAV Performance (USD) Dec - April 1 Year 3 Years 5 Years 10 Years JPMAIT Net of Fees 1.23% 12.29% 16.10% 12.67% 8.47% Competitive ranking percentile Number of Funds Source: J.P. Morgan Asset Management, Morningstar, Bloomberg. Performance figures of those of the JPM American Investment Trust using month end CAPITAL NAV s released to the market on 30 April The figures are on a total return basis in USD. 1 Competitive universe includes all Europe Open ended, US Large Cap Blend Category funds, in the Morningstar Global database.(only the oldest share class of each fund was included) 6

8 Agenda Performance Review Current Economic and Market Data Current Asset Allocation and Fund Structure 7

9 Economic Growth and the Composition of GDP Real GDP Year-over-year % chg 10% Real GDP 4Q14 Components of GDP 4Q14 nominal GDP, trillions USD $19 3.3% Housing 8% YoY % chg: 2.4% QoQ % chg: 2.2% $ % Investment Ex-housing 6% 4% Average: 3.0% $15 $13 $ % Gov t Spending 2% $9 0% -2% Expansion Average: 2.3% $7 $5 68.5% Consumption $3-4% $1-6% '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 -$1-3.1% Net Exports Source: BEA, FactSet, J.P. Morgan Asset Management. Values may not sum to 100% due to rounding. Quarter over quarter percent changes are at an annualized rate. Average represents the annualized growth rate for the full period. Expansion average refers to the period starting in the second quarter of Guide to the Markets U.S.Data are as of 31 March

10 We think we have a few years left in an up cycle Durable goods and fixed investment as % of GDP % of GDP 30% 28% 26% 24% LT average: 25.7% 12/ % 22% 20% 18% Source: J.P. Morgan Asset Management and US Bureau of Economic Analysis. Data as of 31 December

11 Sector performance in 2015 could depend in part on interest rates Correlations Between Weekly Stock Returns and Interest Rate Movements Weekly S&P 500 returns, 10-year Treasury yield, rolling 2-year correlation, May 1963 Mar When yields are below 5%, rising rates are 0.6 generally associated with Positive rising stock relationship prices 0.4 between yield movements and stock returns 0.2 Correlation Coefficient Negative relationship between yield movements and stock returns Sector correlations to rates 2-year rolling, Current Min Max Average Utilities Telecom Cons. Staples Materials Technology Health Care Energy Cons. Disc. S&P 500 Industrials Less positively correlated with rising interest rates More positively correlated with rising interest rates % 2% 4% 6% 8% 10% 12% 14% 16% 10-Year Treasury Yield Financials Source: Standard & Poor s, U.S. Treasury, FactSet, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Markers represent monthly 2-year correlations only. Guide to the Markets U.S. Data are as of 31 March

12 Annual Returns and Intra-year Declines S&P 500 Intra-year Declines vs. Calendar Year Returns Despite average intra-year drops of 14.2%, annual returns positive in 27 of 35 years* 40% 30% 20% 10% % -10% -20% -30% -40% YTD % % '80 '85 '90 '95 '00 '05 '10 '15 Source: Standard & Poor s, FactSet, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For illustrative purposes only. *Returns shown are calendar year returns from 1980 to 2014 excluding 2015 which is year to date. Guide to the Markets U.S. Data are as of 31 March

13 S&P 500 Index at Inflection Points U.S. Equity: Valuation Measures Valuation Measure Description Latest Historical Averages 1-year ago 5-year avg. 10-year avg. 25-year avg.* P/E Price to Earnings 16.9x 15.5x 13.6x 13.8x 15.7x CAPE Shiller's P/E Div. Yield Dividend Yield 1.9% 1.9% 2.0% 2.0% 2.1% REY Real Earnings Yield 3.9% 4.2% 5.0% 4.5% 2.9% P/B Price to Book P/CF Price to Cash Flow EY Spread EY Minus Baa Yield 1.4% 1.7% 2.2% 1.3% -0.6% S&P 500 Index: Forward P/E Ratio 26x 24x 22x 20x +1 Std. Dev.: 19.0x 18x 16x Current: 16.9x 14x Average: 15.7x 12x -1 Std. Dev.: 12.4x 10x 8x '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 S&P 500 Earnings Yield vs. Baa Bond Yield 14% 12% 10% 8% 6% 4% S&P 500 Earnings Yield (Inverse of fwd. P/E): 5.9% Moody s Baa Yield: 4.5% 2% '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 Source: Standard & Poor s, FactSet Robert Shiller, FRB, J.P. Morgan Asset Management. Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months. Shiller s P/E uses trailing 10 years of inflation adjusted earnings as reported by companies. Dividend Yield is calculated as the trailing 12-month average dividend divided by price. Real Earnings Yield is defined as (trailing four quarters of reported earnings/price) - year over year core CPI inflation. Price to Book Ratio is the price divided by book value per share. Price to Cash Flow is price divided by NTM cash flow. EY Minus Baa Yield is the forward earnings yield (consensus analyst estimates of EPS over the next 12 months divided by price minus the Moody s Baa seasoned corporate bond yield. *P/CF is a 20 - year avg. due to cash flow data availability. Data are as at 31 March

14 Corporate Profits and Leverage S&P 500 Earnings Per Share Index quarterly operating earnings $31 4Q14*: $26.77 Profit Margins 11% S&P 500 Operating EPS % of Sales per Share** 10% After-Tax, Adj. Corp. Profits, % of GDP 4Q14*: 9.0% 9% $27 $23 2Q07: $ % 7% 6% 4Q14: 8.7% $19 5% 4% '86 '91 '96 '01 '06 '11 $15 Total Leverage S&P 500, ratio of total debt to total equity, quarterly $11 220% 200% $7 $3 -$1 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 80% '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 180% 160% 140% 120% 100% Average: 161% 1Q15: 103% Source: BEA, Standard & Poor s, Compustat, FactSet, J.P. Morgan Asset Management. EPS levels are based on operating earnings per share. *Most recently available data is 4Q14, which is a Standard & Poor s estimate. **S&P 500 Operating EPS % of Sales per Share fell to 0% in 4Q2008 and is adjusted on the chart. Past performance is not indicative of future returns. Data are as of 31 March

15 Energy: Supply, Demand and Prices Change in Production and Consumption of Oil Production, consumption and inventories, million barrels per day Production * U.S % OPEC % Other % Global % Consumption Growth since 2013 U.S % Europe % Japan % China % Price of Oil Brent crude, nominal prices, USD/barrel $160 $140 $120 $100 $80 $60 $40 Mar. 2015: $20 $58.17 $0 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 U.S. Natural Gas Production*** Trillions of cubic feet, USD 35 Gbl. Natural Gas Prices Japan $13.37 Germany $9.29 U.S. $2.74 EIA Forecast** Shale Gas Other % Global % Inventory Change Other**** '95 '00 '05 '10 '15 '20 '25 Source: EIA, Factset, J.P. Morgan Asset Management. *Forecasts are from EIA Short-Term Energy Outlook and start in ** Forecasts are from EIA Annual Energy Outlook and start in *** Production numbers as of **** Other includes conventional on and offshore natural gas drilling, tight gas, and coalbed methane. Natural gas prices are $/mmbtu and are of February Guide to the Markets U.S. Data are as of 31 March

16 Return and Valuation Dispersion S&P 500 Sector P/Es Relative to History 15 year NTMA P/E, standard deviations above/below average Expensive relative to history Inexpensive relative to history Energy 1.2 Utilities Cons. Staples Financials Materials S&P 500 Cons. Disc. Health Care Industrials Info Tech Telecom S&P 500 Sector Projected 2015 Annual EPS Growth* 53.5% 60% 40% 28.4% 15.9% 13.3% 20% 9.5% 8.2% 4.9% 3.5% 3.1% 3.0% 0% -20% -40% -60% -55.7% -80% Telecom Health Care Info Tech Industrials Cons. Disc. Materials S&P 500 Utilities Cons. Staples Financials Energy Sector Dispersion Standard deviation across annual S&P 500 sector returns 14% 13% Dispersion (LHS) VIX (RHS) 12% 11% 10% 9% 8% 7% 6% 5% Dec '13 Feb '14 Apr '14 Jun '14 Aug '14 Oct '14 Dec '14 Feb ' Source: Standard & Poor s, CBOE, Factset,, J.P. Morgan Asset Management. *EPS growth projections are Standard and Poor s estimates for full year 2015 Data are as of 31 March

17 Consumer Finances Consumer Balance Sheet 4Q14, Trillions of dollars outstanding, not seasonally adjusted $100 $90 $80 $70 $60 Total Assets: $97.1tn Homes: 24% Other Tangible: 6% Deposits: 9% 3Q- 07 Peak: $82.1tn 1Q- 09 Low: $67.1tn Household Debt Service Ratio Debt payments as % of disposable personal income, sa 14% 4Q07: 13.2% 13% 12% 11% 10% 1Q80: 10.6% 1Q15**: 9.9% 9% '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 $50 $40 $30 $20 Pension Funds: 21% Other Financial Assets: 39% Other Non-revolving: 1% Revolving*: 6% Auto Loans: 7% Other Liabilities: 9% Student Debt: 9% Total Liabilities: $14.2tn Household Net Worth Billions USD, not seasonally adjusted $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 2Q07: $67,866 1Q15**: $83,899 $10 $0 Mortgages: 68% $30,000 $20,000 $10,000 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 Source: (Left) FRB, J.P. Morgan Asset Management. Data include households and nonprofit organizations. (Right) BEA, FRB, FactSet, J.P. Morgan Asset Management. SA - seasonally adjusted. *Revolving includes credit cards. **1Q15 household debt service ratio and 1Q15 household net worth are J.P. Morgan Asset Management estimates. Values may not sum to 100% due to rounding. Data are as of 31 March

18 The S&P 500 is a well-diversified benchmark Regional Index Sector Composition* Market Cap Concentration By Regional Index, Top 10 Names As A % Of Total Market Cap 100% Consumer Discretionary Energy Health Care Information Technology Telecommuncation Services Consumer Staples Financials Industrials Materials Utilities 70% 60% S&P/Topix Index (Japan) S&P 350 (Europe) S&P UK Index S&P 500 (US) 90% 80% 50% 70% 60% 50% 40% 30% 40% 30% 20% 20% 10% 0% S&P 500 S&P UK S&P 350 (Europe) S&P/TOPIX (Japan) S&P Asia 50 10% 0% Source: (Both), J.P. Morgan Asset Management. Data are as of 31 March 2015 * GICS Sectors 17

19 Agenda Performance Review Current Economic and Market Data Current Asset Allocation and Fund Structure Asset Allocation Sector Weights Stock Weights 18

20 Asset Allocation 31-Mar Dec Sep Jun Mar Dec Sep Jun-13 Large Cap Portfolio 94.0% 95.4% 95.7% 94.7% 96.3% 95.6% 90.6% 90.2% Small Cap Growth Portfolio 4.7% 3.5% 3.4% 3.6% 2.8% 3.2% 6.0% 5.8% Liquidity 1.4% 1.3% 1.2% 1.5% 0.6% 0.7% 2.8% 4.0% Unrealized Hedge Value -0.1% -0.2% -0.3% 0.1% 0.1% 0.3% 0.5% -0.1% Total* 100% 100% 100% 100% 100% 100% 100% 100% Actual Gearing 109% 109% 109% 109% 109% 109% 105% 105% Source: J.P. Morgan Asset Management as at 31 March The Fund is an actively managed portfolio; holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. *Figures may not add up to 100% due to the removal of the allocation to the US Small & Micro Cap and unquoted portions of the Investment Trust from prior periods. 19

21 Financial Metrics: Illinois Tool Works Source: (Both), J.P. Morgan Asset Management, Company Data 20

22 Financial Metrics: Apple Source: (Both), J.P. Morgan Asset Management, Company Data 21

23 JPM American Investment Trust: Sector allocation As of 30 April % Absolute Relative 15.3% 14.9% 12.2% 11.4% 9.0% 8.3% 4.8% 0.7% 2.7% 2.3% 1.1% 0.8% -1.3% -1.1% -1.2% -0.2% -0.1% -1.9% -2.4% Information Technology Health Care Financials Consumer Staples Consumer Discretionary Industrials Energy Telecom Services Utilities Materials For illustrative purposes only. 1 Relative to the S&P 500 Index. Source: Wilshire (excludes cash). 22

24 JPM American Investment Trust: Stock allocation As of 30 April 2015 Top 10 Holdings (%) Apple 6.8 Microsoft 4.5 Wells Fargo 2.3 Gilead Sciences 2.2 Bank Of America 2.2 Pfizer 2.1 Time Warner 2.0 Citigroup 1.9 Northrop 1.9 Cisco 1.8 Top 5 Overweights 1 (%) Apple 2.9 Microsoft 2.3 Northrop 1.7 Time Warner 1.6 CenturyLink 1.5 Top 5 Underweights 1 (%) Johnson & Johnson* -1.5 General Electric* -1.5 Berkshire Hathaway* -1.4 JPMorgan Chase & Co Procter & Gamble* -1.2 For illustrative purposes only. 1 Relative to the S&P 500 Index. 2 The portfolio is unable to hold JPMorgan Chase for regulatory reasons. *Indicates a stock not held as of 30 April Source: Wilshire (excludes cash). 23

25 Conclusions Valuations are high but not alarming The US continues its modest growth trajectory Corporate America continues to prudently manage its capital 24

26 J.P. Morgan Asset Management Any forecasts or opinions expressed are J.P. Morgan s own at the date of this document and may be subject to change. The value of investments and the income from them may fluctuate and your investment is not guaranteed and investors may not get back the full amount invested. Past performance is not a guide to future performance. Exchange rates may cause the value of underlying overseas investments to go down or up. Investments in smaller companies may involve a higher degree of risk as they are usually more sensitive to market movements. Investments in emerging markets may be more volatile than other markets and the risk to your capital is therefore greater. Also, the economic and political situations may be more volatile than in established economies and these may adversely influence the value of investments made. Telephone lines are recorded and may be monitored for security and training purposes 25