JPMorgan fund manager Georgina Brittain likes pleasant surprises and is finding plenty of reasons to delight in recent trading updates.
Momentum is one of three factors the veteran mid-cap stock-picker favours, the other two being quality and value, and a host of her finds, both long-standing holdings and bargains bagged amid the Covid-19 crisis, have been beating expectations.
‘If you stand back from that, this is about identifying real long-term winners within their area of the market,’ she said. ‘Their position isn’t jeopardised by a blip [ replace with short term hiatus] like Covid. We will continue living our lives. There are sunny uplands.’
The consumer services sector is the largest absolute and relative weighting in the JPMorgan Mid Cap Investment Trust, which she runs with Katen Patel. It accounts for 30.6% of assets, 14% more than the FTSE 250 (excluding Investment Trusts) index.
‘Consumer services are trading so much more strongly than expectations,’ she said, giving the example of home furnishings retailer Dunelm Group, a long-term holding and the trust’s third largest.
Analysts have upgraded their forecasts several times amid stronger-than-expected trading. Sales in the 13 weeks to 26 September soared 36.7%, driven by investment in digital. Online sales accounted for 29.7% of the total, up from 17.6% a year earlier.
Kingfisher, owner of B&Q and Screwfix, was added to the portfolio amid the pandemic. It is benefiting from demand for DIY that ‘went off the scale’. Like-for-like sales jumped 21.8% in the three months to 13 June. ‘There is a clear trend for DIY, which shows no sign of abating,’ said Brittain.
The managers also repurchased discount retailer B&M, which they exited following its ‘ill-advised foray’ into Germany. In March, it sold its loss-making German brand, Jawoll.
Another company the pair bought because of its improving outlook was Premier Foods, owner of the Mr Kipling and Oxo brands. It has announced a raft of good news – soaring sales amid pre-lockdown stockpiling, a reduced debt burden and pensions deficit settlement.
The trust can have up to 15% in off-benchmark positions, generally fully utilised and primarily composed of two types of companies – those that have grown into FTSE 100 businesses and those of the right market capitalisation to fit the mid-cap mould but listed on AIM. One in the latter category, and a recent addition to the trust, is Team 17.
It reported expectation-busting demand during the first half of 2020, with sales and playtime rising particularly for its multi-player co-operative games. Key franchise titles include Worms, Overcooked and The Escapists.
Games Workshop, meanwhile, has produced ‘astonishing numbers’, according to Brittain. The manufacturer of miniature wargames, which the trust has owned for several years, has benefited from greater use of social media to interact with its global community.
‘We’ve done more Zooms than we can shake a fist at – we know this company very well,’ she said. ‘It’s very robust. It had to close its doors and still trading is coming through.’
In the year 2030
Not many technology companies are listed on the UK market. ‘There are so few tech stocks in the FTSE 250 – I’d hope to see more tech coming to the market,’ said Brittain. One recent purchase is trading platform CMC Markets, which has benefited from increased trading activity amid the Covid-19 pandemic. Despite few opportunities to invest directly in technology, its reach extends to many sectors and companies, and will have grown exponentially by 2030. ‘In 2000, most of us were using the internet,’ she said. ‘In 2010, most people had a smartphone. The march of technology continues and will become ever more important, affecting every aspect of every company.’