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JPMorgan US Value C VGICX

Medalist Rating as of | See JPMorgan Investment Hub
  • NAV / 1-Day Return 65.17  /  −0.44 %
  • Total Assets 5.7 Bil
  • Adj. Expense Ratio
    1.440%
  • Expense Ratio 1.440%
  • Distribution Fee Level Low
  • Share Class Type Level Load
  • Category Large Value
  • Investment Style Large Value
  • Min. Initial Investment 1,000
  • Status Open
  • TTM Yield 1.03%
  • Turnover 59%

USD | NAV as of Jun 14, 2024 | 1-Day Return as of Jun 14, 2024, 11:05 PM GMT+0

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Morningstar’s Analysis VGICX

Medalist rating as of .

In good shape despite an impending retirement.

Our research team assigns Bronze ratings to strategies they’re confident will outperform a relevant index, or most peers, over a market cycle on a risk-adjusted basis.

In good shape despite an impending retirement.

Senior Analyst Todd Trubey

Todd Trubey

Senior Analyst

Summary

Lead manager Clare Hart plans to retire from JPMorgan U.S. Value and the firm in fall 2024, which drives the People Pillar rating down to Above Average from High. While Hart has been essential to the strategy’s strong track record since 2004, it’s well-prepared to succeed after she retires. Until then, she remains a portfolio manager alongside Andrew Brandon and David Silberman.

In about a year, Brandon and Silberman will lead the seasoned five-person U.S. value team Hart assembled. Andy Brandon joined J.P. Morgan Asset Management as an equity analyst in 2000, joined this team in 2012, and became a named manager in February 2019. Dave Silberman joined J.P. Morgan Asset Management in 1989 and ran portfolios for private clients before serving as the firm’s corporate governance expert starting in 2008; he joined this team as a comanager in November 2019. Dedicated analysts Tony Lee and Lerone Vincent joined the value team in 2018 and 2022, respectively. The managers will hire a veteran banking analyst within the year.

Similar to the larger equity-income fund (closed to new investors), this strategy rests upon a classic value philosophy: a pool of well-run but undervalued companies with consistent earnings and disciplined capital allocation should beat the market. The key is not in this perspective but in applying it methodically, as this group has. It seeks 85-110 high-quality companies with reasonable valuations; but unlike the equity-income strategy, it doesn’t require holdings to pay a dividend.

Since Hart became a portfolio manager in March 2004, the fund’s institutional shares have gained an annualized 8.3% through August 2023 versus 7.7% for the Russell 1000 Value Index and 7.0% for the typical large-value Morningstar Category peer. While less defensive than its equity-income sibling during downturns, it has done better in rallies over this period. Since Silberman joined Hart and Brandon as a manager, the strategy has topped the typical peer and the index.

The departure of a highly successful lead manager often augurs middling future results, but the veteran team and battle-tested approach here will probably remain a cut above.

Rated on Published on

The approach here is sensible and effective, supporting an Above Average Process rating.

Senior Analyst Todd Trubey

Todd Trubey

Senior Analyst

Process

Above Average

The search for holdings starts with a constant scouring of the U.S. large-value universe for companies with consistent earnings, high returns on invested capital, sound financials, and evidence of capital discipline. Unlike its equity-income sibling, this strategy doesn’t require dividends, and without defensive income this approach tends to have less attractive risk-adjusted returns. But it gives the team leeway to add great firms that don’t pay dividends and also tends to add firms with higher cyclicality and more financial leverage.

After establishing possible targets, the team looks for stocks with relatively low valuations it believes to be trading at a discount to their intrinsic values. While the team uses different metrics for various industries, it generally starts with free cash flow yield and price- and enterprise-value multiples.

The process’s output is an 85- to 110-stock portfolio. The team caps new stocks at 5% of assets but will allow positions to grow past that level. The portfolio maintains exposure to each of the Russell 1000 Value Index’s sectors, but relative weightings can vary by up to 10 percentage points. The team is quite patient even within the large-value category. In the three years since Andy Brandon and Dave Silverman became portfolio managers, the turnover ratio has averaged just 19%, lower than 87% of category peers.

The portfolio’s statistical profile conforms to the process’s principles. As of July 2023, the portfolio’s return on equity and return on invested capital—metrics measuring business quality—were 21.7% and 14.9%, much higher than the Russell 1000 Value index’s 16.9% and 10.8%. And the portfolio’s expected long-term cash flow growth was 15.6%, double the bogy’s 7.3%. Yet the portfolio’s price/free cash flow ratio of 23 was a bit below the benchmark’s 24.

The portfolio sticks close to its benchmark in significant ways. As of August 2023, the strategy’s tracking error—which measures how closely a portfolio’s returns follows a benchmark’s—of 2.4% was below the typical large-value peer’s 4.0% level. Its active share, which measures the differences between a portfolio and its index, was just 64%. And in July 2023, just 12 of the strategy’s 86 holdings were not in the benchmark, including tech blue chips such as Microsoft MSFT, Alphabet GOOG, and Meta Platforms META.

It's tough to consistently outperform with so little deviation from an index, but this strategy’s hallmark trick has been material overweightings of favored index constituents. Of the strategy’s top 10 holdings as of July 2023, just two—Exxon Mobil XOM and Berkshire Hathaway BRK.B—were top-10 members of the Russell 1000 Value Index. The other eight stocks held 16% of fund assets but composed just 4% of the index.

Rated on Published on

The lead manager’s future departure lowers this strategy’s People rating to Above Average from High.

Senior Analyst Todd Trubey

Todd Trubey

Senior Analyst

People

Above Average

In her 19 years as lead manager, Clare Hart built the team, refined the approach, and led the execution; her departure will be a material loss of talent.

Yet the rest of the value team that Hart assembled will remain, preserving an advantage over most peers. In 2019 Andy Brandon and Dave Silberman became listed portfolio managers here. Brandon started on this team in 2012 as an analyst. Silberman headed the firm’s equity investment director and corporate governance teams after managing private clients’ portfolios. They’ve worked together for four years and have complementary expertise: Brandon manages energy, materials, and industrial holdings while Silberman manages the utilities, healthcare, telecom, and technology areas. Both have added value through stock picks since their managerial debuts.

The team now has two dedicated analysts and will soon add a third. Tony Lee joined the value team in 2018; he covers healthcare, insurance, and asset managers. Lerone Vincent joined this team in 2022, covering consumer stocks. Both came from the firm’s central analyst group. Soon the team will hire a banking expert—Hart’s core area of expertise.

This team also has access to J.P. Morgan Asset Management ’s central analyst crew of 22, who average 21 years of industry experience.

This report was updated on Oct. 4, 2023, to correct Lerone Vincent's coverage.

Rated on Published on

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

Associate Director Emory Zink

Emory Zink

Associate Director

Parent

Above Average

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various global cohorts and diverse asset classes, the firm has more tightly integrated its capabilities in recent years, notably through the development of proprietary analytical and risk systems. Investment teams are robustly staffed and helmed by seasoned contributors. The firm’s strategies tend to produce reliable portfolios, and several flagship offerings are Morningstar Medalists. Manager incentives align with fundholders'; compensation reflects longer-term performance factors, and portfolio managers invest in the firm’s strategies as part of their compensation plans.

The firm’s funds tend to be well-priced, but they aren’t as competitive as many highly regarded peers of similar scale. Recent product launches include thematic and single-country strategies, both of which carry the potential for volatile performance and flows, along with misuse by investors. The firm remains intrepid when it comes to developing an environmental, social, and governance-focused framework and continues to move into other areas such as direct indexing through its 55iP acquisition and China through its joint venture, but these complicated initiatives take time to assess any real and lasting effect.

Rated on Published on

This strategy has come through over the long term.

Senior Analyst Todd Trubey

Todd Trubey

Senior Analyst

Performance

Over lead manager Clare Hart’s tenure thus far from March 2004 through August 2023, the fund’s institutional shares gained an annualized 8.3% versus 7.7% for the Russell 1000 Value Index category benchmark and 7.0% for the typical large-value category peer. For the shorter but crucial period with all three portfolio managers starting in November 2019, the strategy’s 10.1% annualized return crushed the benchmark’s 7.8% and typical rival’s 8.3% gains.

Morningstar attribution suggests that the new comanagers have boosted returns through stock selection. From November 2019 through August 2023 there’s materially beneficial stock-picking in Brandon’s area of energy, materials, and industrials, as well as in Silberman’s domain of utilities, healthcare, telecom, and technology.

Unlike its defensively sturdy equity-income sibling, this one tends to thrive in bull markets. In the huge bull market from March 2009 through September 2018, this strategy’s institutional shares surged 17.0% annualized, topping the Russell 1000 Value Index’s 16.3% gain and thumping the typical large-value peer’s 15.1% return. That more cyclical profile, however, means that this strategy tends to have marketlike volatility over most periods rather than low volatility like its sibling.

Hart’s impending departure diminishes this fund’s return prospects marginally, but it remains a worthy option.

Published on

It’s critical to evaluate expenses, as they come directly out of returns.

Senior Analyst Todd Trubey

Todd Trubey

Senior Analyst

Price

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Bronze.

Published on

Portfolio Holdings VGICX

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 21.8
Top 10 Holdings
% Portfolio Weight
Market Value USD
Sector

Wells Fargo & Co

2.83 157.5 Mil
Financial Services

ConocoPhillips

2.74 152.4 Mil
Energy

Chevron Corp

2.28 126.8 Mil
Energy

Berkshire Hathaway Inc Class B

2.21 123.2 Mil
Financial Services

Bank of America Corp

2.18 121.2 Mil
Financial Services

Exxon Mobil Corp

2.15 119.4 Mil
Energy

UnitedHealth Group Inc

1.90 105.6 Mil
Healthcare

CSX Corp

1.87 104.1 Mil
Industrials

Morgan Stanley

1.82 101.3 Mil
Financial Services

Charles Schwab Corp

1.80 100.0 Mil
Financial Services