January Newsletter to Clients

Enjoy this month’s edition that features thoughts from the fund manager of Janus Henderson Enterprise fund, some historical data on stock market performance and 1099 Tax Form information from TD Ameritrade.

Recently the investing magazine, Barron’s, interviewed the portfolio manager of the Janus Henderson Enterprise Fund (JMGRX), that many of us own. The fund invests primarily in mid-size, U.S. growth companies. In 2022, the fund returned -18.6%, but still out-performed its benchmark index that returned -25.9%. The fund has returned an average of over 12% per year over the last 10 years. Performance quoted represents past performance and does not guarantee future results.

Below are some of Brian Demain’s thoughts on investing and the fund itself:

Outlook on 2023:

“Next year we could see inflation slowing, and the economy slowing meaningfully on the back of the Federal Reserve rate increases. Our average hold period for a stock is close to 10 years, so we’re thinking longer-term.”

What do you look for in your fund’s investments?

“We focus on both upside and downside when we look at stocks. We consider ourselves growth investors, but downside matters, and that’s part of our investment process.

Companies must meet four criteria: 1) Sustainable growth; 2) Strong competitive position; 3) Good management and corporate board, and; 4) Reasonable valuation. What we mean by sustainable growth is companies that are growth companies today and will still be growth companies in three, five, seven and 10 years. We…think that revenue growth is the strongest driver of value creation for companies over time.”

What do you consider your edge?

“The average mid-cap manager has had turnover (of stocks in their fund) of 76%, on average, over the past decade. Our average turnover has been 14%...we’re playing a different game.”

What stocks are you excited about?

“One of the investment themes that we’re most excited about over the next decade is the growth in electric vehicles, or EVs. In 2022, out of 80 million cars produced globally, 10 million were electric. By 2030, that’s going to be up to 40 million, so that’s a quadrupling of the EV market. Semiconductor content per car will be going from about $600 in 2022 to over $1,000 by 2030.”

Early indicators of 2023 stock market performance

Wall Street tends to pay particular attention to the performance of the S&P 500 in the first five trading days of the year. Since 1929, the S&P 500 index has risen 79% of the time, with an average gain of 11.9%, for the year when it finished the first five days in positive territory. What happens when the first five days are negative? About 50/50 up or down.

The index gained about 1.5% over the first five trading days for those of you who celebrate. Or feel free to check your astrology report. Over the short term, that may be as accurate. Over the long term, history shows us stocks increase in value and create great wealth.

Tax forms from TD Ameritrade

According to TD Ameritrade, the first wave of 1099 tax forms for taxable accounts is targeted to arrive electronically on the close of business January 20. Those forms will be accessible through your Moneywatch portal a few days later. There will be subsequent waves, depending on what investments are held in the account, through the end of February.

Thank you for your continuing confidence.