In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they’d never buy.
This week our interviewee John Citron, Investment Manager of the JPMorgan Emerging Markets Investment Trust (JMG), which has a Morningstar Medalist Rating of Gold.
Which Sector Shows the Biggest Promise in 2023?
Technology is a thriving industry and includes some of our longest holdings, while also providing a fertile environment for new ideas. Within this, we like two types of technology businesses: tech “enablers”, which provide the building blocks and tools for technological innovation (from semiconductors to automation), as well as broader companies with great management teams that invest in their research and development. These latter companies are adept at anticipating new technology cycles and trends, such as AI, and evolve accordingly.
What’s the Biggest Economic Risk Today?
Geopolitical risks, such as the shifting dynamics between the US and China, will inevitability have a bearing on emerging markets. Nevertheless, companies that have built diverse supply chains and have manufacturing bases in multiple locations should be well placed to navigate any geopolitical headwinds.
Describe Your Investment Strategy
To harness opportunities in emerging markets, we believe an active, bottom-up approach is key. We look at the growth potential of specific, quality companies rather than taking a view on individual countries, which is reflected in our low stock turnover and concentrated portfolio. For us, economic fundamentals and corporate skills are the most important determinants of long-term investment outcomes, as opposed to the overall performance of individual markets.
Which Investor(s) Do You Admire?
It is hard to look further than Warren Buffett, whose wisdom we continue to find useful every year.
Name Your Favourite ‘Forever Stock’
Although nothing is exempt from rigorous scrutiny, we think that Taiwanese chipmaker, Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading semiconductor manufacturer, is a great investment.
We identified TSMC at the early stages of its development and have held the stock since 1998. This company is the global leader in semiconductor foundry, providing manufacturing for semiconductor chips. It has been a consistent holding in the trust due to its ability to generate high levels of profit, strong cash flows and its excellent dividend policy.
Looking ahead, TSMC remains nimble and is meeting the industry’s growing focus on sustainability and the transition toward a low-carbon economy. For example, it was one of the first companies in the emerging market universe to include the cost of carbon emissions in their financial analysis when building new foundries.
What Would You Never Invest In?
Meme stocks. We invest for the long-term, not headlines or fads.
Growth or Value?
As an emerging markets investor, I am naturally biased towards growth stocks. However, our investment approach focuses on companies that demonstrate sustainable growth potential over the long-term rather than focusing on short-term market movements.
House or Pension?
From a portfolio perspective: both! In an emerging markets context, we continue to find interesting ideas in the financial space as rising incomes mean increased interest home ownership and long-term savings products.
Crypto: Brilliant or Bad?
It has certainly been a fascinating part of recent history, but one I have witnessed from the sidelines.
What Can be Done to Improve Diversity in Fund Management?
A lot of things need to be done, but one important part I am passionate about is ensuring that school and university students know about the industry and have a wide range of routes available to enter it. We run a lot of programs at JPMorgan Asset Management around encouraging social mobility and I am proud to see colleagues in the building who came through them.
Have you Ever Engaged With a Company and Been Particularly Proud (or Disappointed) of the Outcome?
We engage with every company in which we invest, and many which we are assessing as potential investments. In the same way that you can never declare victory with an investment, as the future story is yet to be told, the same holds true for engagement. It is an iterative process and rather than make ourselves proud, the aim is just for gradual improvement over time.
What’s the Best Advice You’ve Ever Been Given?
Most of the best investment advice comes from Buffett. “Risk comes from not knowing what you’re doing” is one of the many that will be timeless.
What Would You be if You Weren’t a Fund Manager?
A journalist.
