Juno Continuation Fund withstands baptism of fire in volatile year with a 10.2% return

• Juno Continuation Fund ends first year with a 10.2% return since inception on February 1; including 2.2% in the fourth quarter.
• The European index of medium-sized companies increased by no more than 4.8% over the same period.
• In the fourth quarter, during the rotation from quality stocks to cyclical sectors, positions in some quality stocks were increased in order to take advantage of price weakness.
• The uncertainties surrounding Covid will remain high in 2021, but the companies in the portfolio are resilient thanks to the focus on balance sheet ratios and predictable earnings growth.

The Hague – January 15, 2021

After a difficult start due to the pandemic outbreak in 2020, the Juno Continuation Fund ended the year with a 10.2% return. The European index of medium-sized companies increased by 4.8% over the same period. The Juno Continuation Fund therefore had a good first year, which started on the inception date of the fund, on February 1, 2020.

The young fund uses the proven Juno strategy to select only quality companies with long-term, above-average and predictable earnings growth over a three to five-year period, with conservative financing. This strategy leads to a portfolio of robust European (mostly) family-owned businesses that are less dependent on external, economic conditions for achieving turnover and earnings growth and that have good financial buffers. Even in an extreme event such as a pandemic, these types of companies will hold their own, although the fund did part with a number of companies, because, among other things, the predictability of earnings sharply decreased.

A company like Teleperformance was able to quickly and accurately make the switch to “work from home” and was therefore able to win an above-average number of new contracts. HomeServe offers consumers insurance on home repairs. Their subscription model again proved resistant and significant growth was reported in the important North American market.

The cash proceeds from sales that we made in March and April, were partly put to work again in the fourth quarter to buy quality stocks during the broad market rotation to cyclical sectors. This change in sentiment was driven by enthusiasm for the announcement of effective vaccines against Covid-19. As for 2021, uncertainties remain high, especially about the scale and speed of the recovery from the Covid crisis.

Rob Deneke, manager of the Juno Continuation Fund: “In investing, it is very important to limit the downside. Thanks to our strategy, we are invested in solid companies that can take a beating, even if the economic recovery takes longer than what the market now seems to be pricing in.

Remember, European companies will report an average earnings decline of 30% over 2020 in the coming months. The focus on stable and predictable earnings growth paid off again in 2020. In the first three quarters of last year we stayed far ahead of the market average, but in the fourth quarter, quality stocks came under some pressure. We took advantage of that situation to increase our holdings. Over the long term, our target underlying earnings growth of 10 to 15%, and over time we expect our fund’s return, is well on track.“

The quarterly reports can be found here and the most recent fact sheet here.

About Juno Investment Partners

Juno Investment Partners is an independent asset manager based in The Hague. Juno invests in concentrated portfolios of high-quality European listed companies, often family-owned businesses or companies in which founders and directors are shareholders. The selection process emphasises predictable earnings growth, a high return on invested capital, low debt levels, strong margins and free cash flow, and a sustainable competitive advantage.

Launched in January 2008, the Juno Selection Fund focuses on small- and mid-cap European companies. The portfolio typically consists of around fifteen companies. Each is analysed intensively, and regular contact is maintained with management. The investment horizon is long, generally well over five years. Juno’s analysts, portfolio managers and employees also invest their personal capital in the JSF.

In addition to the JSF, Juno offers individually managed accounts through separate mandates, using the same investment approach. Juno holds an AIFM licence issued by the Dutch Authority for the Financial Markets (AFM).