C-shares issued by JPMorgan Global Growth & Income (JGGI ) as part of its absorption of smaller stable mate JPMorgan Elect last year offer a cheap way into the top-performing investment trust in its sector.

JGGI issued more than 26 million C-shares to investors in Elect’s Managed Growth sub-portfolio in October as a temporary home while their assets were sold and replaced with JGGI’s. They do not qualify for JGGI’s next dividend.

The alignment of the two portfolios was completed last month but due to an anomaly, probably caused by the illiquidity and lack of trading in the stock, their price had fallen to an 8% discount below net asset value (NAV) at yesterday’s close, according to the JP Morgan Asset Management website.

By contrast, shares in the £1.5bn JGGI – into which the C-shares will convert this month – stood at a 2% premium over NAV, presenting a potential 10% uplift for investors who can get hold of them.

Investors on the Citywire Forums have recently commented on the inability to get live quotes on the C-shares from share-dealing websites, but say they have been successful in buying small amounts.

Brokers caution investors against short-term trading in the stock in the hope of capturing a narrowing in the discount ahead of the conversion. A wide 9% spread between the buy and sell prices could wipe out any gains, they say.

However, for anyone looking to buy and hold they could still represent an attractive entry point.

Good half year

This week JGGI published half-year results showing it outperformed in the second half of last year with an 8.6% total gain in NAV that beat the 3.3% rise in the MSCI All Countries World index.

The shares have gained 8% since the financial year-end, taking three-year shareholder returns to 69.1%, the best in its Global Equity Income sector and beating the benchmark’s 35.9% total return.

Fund managers Helge Skibeli, Tim Woodhouse and James Cook, who recently replaced Rajesh Tanna, said the hunt for ‘high-quality companies at compelling valuations’ was a strategy that was ‘well suited to this new regime’ of rising interest rates that markets were faced with.

The automotive sector was a good source of returns, with truck maker Volvo  delivering a ‘particularly impressive’ 18% gain over the half year ‘given the supply chain issues that it continues to wrestle with’.

Tyre maker Michelin also reaped the benefit of a move to electric vehicles, as Skibeli said the ‘increased technical demands as a result of the heavier vehicles requires expertise that few companies possess’.

‘Over the next decade we expect this to help [Michelin’s] pricing power,’ he explained. ‘Even in a difficult operating environment over the past few months, it was able to maintain its operating profit guidance in the face of inflationary materials costs, and we feel confident it can continue to operate at a high level.’

The managers continued to avoid Tesla shares, which they believe are still overvalued even after a 60% slump in the fourth quarter.

They said that this reflected a ‘more difficult pricing environment, and in our view, the realisation that Tesla is not immune to the wider competitive challenges that exist in this market’.

‘As we see the continued rollout of electric vehicles from other manufacturers, we believe that pricing will continue to face pressure, which in turn means that high margin expectations are unlikely to be met,’ they said.