‘American companies will boom under Trump’
Those who predicted that Donald Trump’s wilder policies would be quietly dumped once he assumed office have quickly been proved wrong. His inauguration speech mantra of “America first” suggests that an inward-looking economic strategy will be a mainstay of Mr Trump’s term.
This could boost the US economy, alongside his promised investment in infrastructure. The impact on the global economy is less clear.
But fund managers focused solely on American companies are preparing to profit.
Nicolas Janvier, co-manager of the Threadneedle American Smaller Companies fund, explains how the £850m portfolio will benefit from Mr Trump’s presidency – and why managers who say they ignore the wider economy are liars.
What is your investment strategy?
We are interested in small and “mid cap” American companies, which can have market valuations of anywhere between $500m and $10bn [£400m and £8bn]. We want earnings growth in the 75 or 80 stocks we hold.
We look at our companies in two ways.
A larger proportion of the portfolio is made up of those firms whose growth prospects are dependent on their position in the marketplace they operate in.
We allocate a much smaller part of the portfolio to firms whose prospects are much more aligned with what is going on in the wider economy.
How do Donald Trump’s policies influence your investment decisions?
What you don’t do is listen to what Mr Trump, or any head of government, says and take it to the bank. We try to understand the broader environment.
The Republicans have been looking at tax reform for years, it’s not an original Trump idea, but it’s now far more likely.
We haven’t made wholesale changes since the election. Banking is one sector we are really positive about and have been for some time. It has long been our view that interest rates would go up and drive up the profit margins of banks.
When a fund manager tells you they don’t pay any attention to the wider economic environment, either they are lying to you or they are lying to themselves.
We think our fund can benefit from Trump’s “America First” stance. This is because we expect the companies we own to benefit from more exposure to spending, tax cuts and deregulation, and to see some relative shelter from the adverse effects of protectionism and a stronger dollar.
If there is greater protectionism how will you be affected?
In classical economics, protectionism is not a good thing, but you will have winners, too.
Those firms that employ and produce mostly in America will win, and companies selling into the US and producing goods elsewhere are the obvious losers.
At the same time, as the dollar increases in value, the value of revenue earned overseas reduces. That’s why we’re coming back to firms like JetBlue, the domestic airline.
Nicolas Janvier of the Threadneedle American Smaller Companies fund tells Sam Brodbeck what he is buying
What has been your best investment decision?
Albemarle is the world’s largest producer of lithium, the most important element for electric batteries. It will benefit hugely as the electric car industry expands.
That and Burlington Stores, which is like TK Maxx [the discount chain] in Britain, have been our best picks.
And the worst investment?
Owning BankUnited was a mistake.
Our thesis was that the company would continue to grow its loan book ahead of its rivals, but in order to support that growth it needed to grow its deposits faster than we anticipated.
So we sold at a loss. Often people want to be right, and they’ll hold stocks for too long. I go home after
eating humble pie every day.
Do you have your own money invested in the fund?
Yes, a meaningful amount.
What would you have been if not a fund manager?
A sportsman and then a broadcaster, someone like Jamie Carragher.