Juno Continuation Fund: Q4 2021
Many stocks’ valuations very high at the moment
Juno Continuation Fund sees euphoria disappearing from the market
- Underlying earnings growth of the portfolio above expectations in 2021
- Fund lagged the market in 2021 due to popularity of riskier stocks
- Physical company visits finally possible again
- Quarterly reports: focus on Scout24, ICON, Teleperformance, JustEatTakeaway and Temenos
The Hague – January 31, 2022 – The Juno Continuation Fund considers stock market valuations to be high at the moment and sees the first signs that the euphoria in the market is coming to an end. The fund, which invests in companies with predictable, high annual earnings growth and defendable market share, has struggled to find shares of high-quality companies at reasonable valuations. As a result, the fund’s cash position at the end of December 2021 was relatively high.
In 2021, the Juno Continuation Fund achieved a return of 5.4%. The fund underperformed the MSCI Europe Mid Cap Index, which ended the year with a performance of 21.6%. According to Rob Deneke, member of the portfolio management team, there was too little focus on risk and longer term considerations over the past year: “The largest share price gains in the broader equity markets have been realised in sectors where the risk is significant. As a result, the type of companies in which we prefer to invest, with predictable and regular earnings growth, is slightly less popular at the moment. This is disappointing as the fund’s portfolio companies showed continued good earnings growth of around 20% in 2021. It is also important that these (family-owned) businesses have little or no debt and can grow independently.”
“As an investor, it is better to stick with those companies that really create economic value, rather than stocks that are only a mere promise for the future.”
Deneke finds it remarkable that there are practically no analysts who sound warnings about the current valuations in the stock markets. “Who is still mentioning price-earnings ratios? In such a market it is really important to be in stocks that have ‘content’ and are able to grow their earnings systematically for the coming years. As an investor, it is better to stick with those companies that really create economic value, rather than stocks that are only a mere promise for the future.”
Making company visits again
“Knowing what you are buying, doing thorough research and physically visiting companies is essential to our investment style, so we are excited to have many physical company visits again in 2022,” said Duncan Siewe, member of the portfolio management team.
Scout24
In 2021, the Juno Continuation Fund took a position in Scout24, the German equivalent of Funda in the Netherlands or Zillow in the US. Juno has been following this company for some years and the share price showed a weak trend in 2021. This made it possible to build up a position at a reasonable valuation. Juno finds Scout24 promising because of the growth, the high operating EBIT margin (>40%) and an ever-innovative product range for real estate agents, consumers in the rental segment and home owners.
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).
