Buy, hold or sell: JPMorgan Claverhouse

JPMorgan Claverhouse, a stalwart of the Association of Investment Companies' UK equity income sector, has the longest record of any UK-only focused investment trust for growing its dividend, having raised it every year for the past 44 years.

Manager William Meadon, who has managed the trust for five years, describes it as a 'get rich slow' fund. It aims to outperform its benchmark index, the FTSE All-Share, by 2 per cent a year.


Chemicals company Synthomer is under new management, headed by chief executive Calum MacLean. The team joined in November 2014 from Switzerland-based competitor Ineos.

Meadon says the team's decision to forego Swiss tax benefits to return to the UK 'caught his eye'. He mused at the time that 'these chaps must be confident of making some money'.

He describes Synthomer's management team as deal-makers, as they have done a number of successful deals that have increased earnings significantly over time, while not stretching the balance sheet.

jpmorgan-claverhouse-versus-uk-equity-income-sectorHowever, if they find a deal too expensive, the team will move on and give cash back to shareholders.

The firm has a history of paying special dividends, Meadon says, and when it does, they boost the yield to around 6 per cent.

Meadon says: 'We met with the team, and we were very impressed with their plan to execute better on organic strategy. They've certainly done that. You've got organic growth of 8-9 per cent a year.'

Claverhouse initially bought into the firm in May 2015 at 349p. The price as at 6 March stands at 445p.

Meadon says that because the company is not particularly well known, it currently trades at a significant 15 per cent discount to its sector, 'which just seems wrong to us'.

He adds: 'The stock market isn't giving them the benefit of the doubt, but we have a lot of confidence in them, the cash flow is good, they're shareholder-friendly and to date they haven't put a foot wrong.'


Despite the Alternative Investment Market (Aim) being outside Claverhouse's benchmark index, the trust is allowed to hold Aim stocks to a limited degree.

fevertree-versus-vodafone-share-price-performanceFeverTree, a manufacturer of premium natural spirits, is one of the biggest Aim success stories.

It floated on the junior market in November 2014 at a share price of 135p that has since grown tenfold to 1,340p. FeverTree is now Claverhouse's largest 'active position'.

The firm was not on the trust's radar when it was floated, but Claverhouse bought in during July 2015 at a price of 402p, and later topped up its holding at around 600p.

Meadon says the company's founders, Charles Rolls and Tim Worrillow, are very shareholder-friendly, as they still own 15 and 8 per cent of the equity respectively.

The firm, he adds, has consistently beaten expectations, generally by 15 per cent; and it did so again in results last December.

Meadon warns that investors should be aware that the firm is on a very high rating of 42 times forecast price/earnings, 'which will frighten a lot of people'.

How to make the price/earnings ratio more useful

However, he adds: 'The underlying growth is so strong that in two or three years shareholders who can close their eyes and wear that sort of rating should be rewarded.'

He expects an 'end game' some way down the line, as there was with Rolls's previous company, Plymouth Gin, which was sold to Swedish vodka-maker V&S Group. A company like Diageo could pounce, but in the meantime there could be further upside.

FeverTree's launch of Madagascan Cola in the US, a market it has not yet cracked, is clever, as it is not pitching wholesale into the soft drinks market. Meadon says: 'They're pitching it as a mixer, [but] if people start drinking it as a soft drink there is enormous potential.'


Vodafone has been a long-term holding for Claverhouse, but the trust sold portions of its holding in July 2015 and November 2016 at around 230p and 200p respectively. It has not sold out completely, but its position is as underweight as the fund can go.

Meadon says the stock, at 33 times March 2017 forecast earnings, is too expensive. 'It's a reasonable company. I don't think it's a great company anymore, but it's priced as if it were a great stock,' he adds.

'It seems to me that the time to catch companies like Vodafone is when they are on their way to becoming big.'

As BT has shown with its Italian problems, with big global businesses you have to be on top of every single division. 'Vodafone has had problems geographically, most recently with a joint venture in India.'

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