This strategy’s successful lead manager and deep supporting analyst team are enough to earn cheaper share classes of JPMorgan US Equity and its Luxembourg and U.K. clones a Morningstar Analyst Rating of Bronze, while more expensive ones receive Neutral.
Lead manager Scott Davis is up to this strategy’s challenging task of topping its S&P 500 prospectus benchmark. Davis has put up solid results while managing a portion of this formerly multisleeve strategy since 2014 and also in a separate account version dating to 2013. J.P. Morgan gave Davis full control of the Luxembourg- and U.K.-domiciled funds in mid-2019 and the U.S. mutual fund in February 2020 to put its top-performing manager in charge and to simplify the process, ensuring that a single stream of thought guides the portfolio. Davis retains final say despite the November 2021 addition of his first dedicated partner, comanager Shilpee Raina. The additional support may help him cover more ground with the firm’s 20-plus-member analyst roster.
Davis takes pride in his close work with analysts, though a clear edge to the process isn’t yet apparent in a limited sample under his sole watch. J.P. Morgan’s experienced core research team supplies Davis with top picks in their respective industries. Davis maintains a relatively concentrated portfolio of 50-60 stocks but seeks to minimize the magnitude of sector or factor bets. For example, while the portfolio had a minuscule stake in energy companies for much of 2020 because of Davis’ concerns about their competitive environment, he elected to increase the portfolio’s weighting in financials stocks, which were similarly trading cheaply, to ensure that its exposure to cyclical companies wasn’t too light. That decision paid off as value-oriented stocks rebounded late in 2020 and into 2021. He also tends to add and trim positions aggressively as their calculated upside ebbs and flows, a tendency that benefits when stock prices mean revert. While Davis’ artful approach has some appeal, it may not be easily repeatable and has yet to be battle-tested more broadly.
Through the first 11 months of 2021, the U.S.-based R6 shares placed in the top quartile of large-blend Morningstar Category peers, following a similar top-quartile result in 2020. While its long-term track record is quite strong relative to rivals, beating its S&P 500 benchmark has been a tougher task, though it came ahead of it over the trailing five- and 10-year periods ended November 2021 thanks to its strong recent results. Whether or not it can repeat the feat will depend on Davis’ ability to consistently find ways to add value through stock selection and portfolio positioning.