Jupiter Income - Staying loyal to value

Richard Wood | Thu 30 May 2019

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• The fund’s strategy has been out of favour recently
• The fund didn’t perform as well as the broader UK stock market over the last year
• Manager Ben Whitmore has bought more shares in WPP and ITV

Our view

Ben Whitmore’s investment style, buying companies that are unloved and out of favour, is in itself currently unloved and out of favour.

His style’s known as value investing but it’s growth investors, those prepared to pay more for companies they think will consistently grow profits, that have outperformed in recent years.

We think Whitmore’s one of the best value investors out there. He has a true passion for value investing and we admire his ability to stick to his process through good times and bad. It’s rewarded long-term investors handsomely and Jupiter Income is included on the Wealth 50 list of our favourite funds.

Performance

Over his long career, Whitmore’s made more money for his investors than the broader UK stock market. He took control of the Jupiter Income Fund at the start of 2013. The fund’s since returned 79%* and the UK stock market 66%.

The fund did not fare as well as the UK market over the last year to 30 April however. Technology and mining companies did well but Whitmore didn’t have much invested in them so missed out on some returns. Instead, he had more money in financial companies which didn’t perform as well.

Past performance is not a guide to future returns. The value of investments can go down as well as up so you may get back less than you put in.

Past performance is not a guide to the future. Source: *Lipper IM to 30/04/2019

Comebacks and value traps

Whitmore recently topped up his investment in media and advertising business WPP because he thinks the problems it faces can be resolved, and other investors have underestimated its future prospects. However, he does agree WPP’s North American business has been slow to adapt to declining demand for big billboard advertising. Its shares have suffered as a result.

But Whitmore highlights this only accounts for part of the company’s profits. WPP recognises the issue and is addressing the increased popularity of personalised advertising. The company’s still profitable and its debt manageable.

Whitmore used market dips at the end of 2018 as an opportunity to buy more shares in WPP as well as Vodafone, Standard Life and ITV.

ITV’s core business of selling advertising slots between shows has come under pressure because more people are paying for subscription services such as Netflix and Amazon Prime. But the rise of paid for TV services means there’s also an ever growing market for content producers.

ITV Studios is the largest producer of content in the UK so stands to benefit from this trend. The BBC’s recent hit show ‘The Bodyguard’ was actually made by ITV and sold to the BBC. Whitmore thinks ITV’s production arm stands it in good stead to be successful in the future.

That’s not to say a company’s share price must rebound after falling. Whitmore carries out a careful assessment of the difficulties facing companies he might invest in and avoids those whose challenges he thinks will be permanent. For example, he doesn’t invest in companies that produce print-form newspapers because he can see a future world where no one buys them.

Two's company

Value investing requires patience. It can be psychologically challenging to stick with a company when the market’s avoiding it. Whitmore used to think working alone helped him to maintain clarity of thought. Working with now co-manager Dermot Murphy has changed his mind.

In addition to providing a different perspective on investment ideas, as well as new ones, Murphy and Whitmore help each other stay true to their process. They’re constantly reminding themselves their value style has typically delivered superior returns compared to a growth style and believe it’s only a matter of time before it starts working again.

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