‘Amer­i­can com­pa­nies will boom un­der Trump’

The Daily Telegraph - Your Money - - INVESTING -

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.

www.tele­graph.co.uk/funds

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