Underlying portfolio companies achieve attractive earnings growth despite corona
Juno Selection Fund: 17.7% return after nine months
The Hague – October 16, 2020
Frans Jurgens, manager of the Juno Selection Fund: “Dutch parenting beliefs rely on the three R’s: “Rust, Reinheid en Regelmaat”, which roughly translates to rest, cleanliness and routine, are not only important in the upbringing of children, but also apply to Juno’s investment style. Rest is reflected in the solid fundamental research that keeps us sane in tumultuous times. Cleanliness is important in assessing how the companies in which we invest do business. Routine is what we wish to see in our portfolio companies: an above average earnings growth between 10 and 15% year after year. We have made several significant changes to our portfolio in March and April, whenever we saw those three “Rs” could be in jeopardy, and not without result.”
Lennart Smits, manager of the Juno Selection Fund: “Family-owned businesses form the core of our portfolio, precisely because these companies have a long-term focus and the company meets strict criteria. You see that these companies often have a better balance sheet, little external financing and, in general, a strong focus on free cash flows. A high return on invested capital is often a strong indication that with a good business model, future earnings growth can remain predictable. This year, despite corona, it has indeed turned out to be business as usual for those companies in the portfolio. In March and April, we intervened in the portfolio where holdings gave us cause for concerns about their earnings growth predictability and thereby had to sell positions where we had been a co-owner of for years. Such an active intervention in the portfolio, on that scale, is unusual for us, but it has had a positive effect. The companies we now have in the portfolio collectively show strong underlying earnings growth, which this year has already partly translated into attractive price increases.”
About Juno Investment Partners
Juno Investment Partners was established in 2007 as a fully independent fund manager and has an AIFM license (as referred to in Section 2:65 of the Wft), issued by the Dutch regulator AFM. Juno specializes in the selection of exceptional listed (family owned) companies in Europe. Companies that are able to achieve predictable and stable earnings growth year after year are considered for investment. The selection process focuses on the return on invested capital, a low debt ratio and free cash flows of a highly predictable nature. The analysts/portfolio manages compile a highly concentrated portfolio of approximately fifteen companies that they identify, analyze and visit regularly. Selected companies remain in the portfolio for a longer time period (usually more than five years). All analysts/portfolio managers have themselves invested in the Juno funds.
Juno offers three products: The Juno Selection Fund, which focuses on the selection of smaller and medium-sized listed companies, the Juno Continuation Fund for medium-sized companies and individual asset management using the same investment style, for larger clients through managed segregated accounts.
– The Juno Selection Fund was launched in 2008. This mutual fund invests in distinctive European small and medium-sized companies with an initial market capitalization of €250 million to €4 billion. In recent years, this investment style has resulted in above average investment returns for participants in the Juno Selection Fund. This fund has been hard closed for further (follow on) subscriptions since 2018.
– The same investment strategy is applied in the Juno Continuation Fund, which was launched on February 1, 2020. This fund focuses on unique, medium-sized European companies with a market value between €4 billion and €20 billion at the time of initial purchase. As is the case with the Selection Fund, the Continuation Fund also has a strong preference for investments in businesses that are family owned, or companies in which a family or management itself is also a shareholder.
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