Clare Hart grew up in Brooklyn, went to high school in Manhattan, and studied political science at the University of Chicago—a clear pathway to a career in law.
She was on that track, at least for a short time in her early 20s, but Hart quickly came to a crossroads. After starting out in accounting, she worked as a paralegal in her second job after college. Though Hart enjoyed the challenges of a trial she was assigned to, one of the partners at the law firm where she worked offered her some advice: Many trials involved bankruptcies or divorce cases. “You should seriously think about whether you want to spend your life with people who basically are going through the most miserable time of their life,” the partner advised.
It was good advice for Hart, who returned to accounting before eventually pivoting to equity research and then portfolio management.
Since 2004, Hart, 49, has helped run the
JPMorgan Equity Income fund
(ticker: OIEIX), whose assets now total around $27 billion—one of the largest mutual funds overseen by a woman. She is the lead manager.
The portfolio, which is in Morningstar’s U.S. large-cap value category, has a 15-year annual return of about 7.3%, besting more than 90% of its peers. That compares with a 6% annual return for the Russell 1000 Value index. The fund’s A shares carry a 5.25% load.
The fund has acquitted itself well over shorter periods too—and with less volatility than its average peer. In a recent interview, Hart offered a succinct description of her investment philosophy: “We look for quality companies with a reasonable valuation that pay a dividend.”
How Hart went from a paralegal to a seasoned fund manager required foresight, perseverance, and a willingness to change course. Back in her postcollege days in Chicago, Hart earned a master’s degree in accounting, but she didn’t love the work. “You came to their office and they got nervous, ” she recalls of her visits to examine companies’ books.
Hart eventually had an important conversation with a friend, who likened her job to “an archaeological dig of what happened at a company over the previous 11 months. If you take that and flip it forward, that’s what we do on Wall Street in equity research,” she recalls her friend saying.
That led her back to New York, where she started in late 1998 as a sell-side real estate investment trust analyst at Salomon Smith Barney. She eventually moved to Robert Fleming, a British asset manager, in its New York office. Chase Manhattan acquired the firm not long afterward, and that was followed by Chase buying J.P. Morgan.
Hart has been managing the equity income strategy at J.P. Morgan Asset Management since 2002. To get into the fund, a stock’s yield must be at least 2%—a requirement she sees as a safety net and not something that constrains her stock picking.
Although the majority of the fund’s shareholders opt to reinvest monthly distributions, some take the cash out—perhaps retirees who need income. “In the back of my mind, I imagine this person going to the grocery store,” she says.
But she won’t chase any high-yielding stock. “There are always higher-yielding [stocks] in the market, and they are usually attached to something where you are either not going to get the capital appreciation or the dividend is not safe,” she says.
In recent weeks, with stocks getting pummeled amid growing fears about the coronavirus, Hart hasn’t made many changes to her portfolio. She’s added to some holdings and tweaked some weightings—but there has been “no massive rotation or change to the risk profile” of the fund, she says.
To learn more about companies, Hart enjoys meeting with executives, many of whom regularly pass through
JPMorgan Chase’s
New York office. Those interactions, she says, allow her to get a better picture of executives “managing your money.”
She recalls one meeting when a CEO deferred to the investor-relations person on her questions about earnings and the company’s objectives. That isn’t unusual in and of itself, she says, but “the difference this time was that the CEO tried to avoid answering our questions by pulling out his phone and physically distancing himself from us to avoid our questions.”
She ended up selling the stock.
Note: Holdings as of Jan. 31. Returns through March 9; three- and five-year returns are annualized.
Sources: Morningstar; J.P. Morgan Asset Management
At the end of last year, the fund held 90 stocks, at the lower end of its typical range. As of Jan. 31, the portfolio’s second-largest sector weighting was health care at 13.2%, behind financials at 25%. Health-care stocks have been volatile, owing in no small part to the vagaries of the presidential election campaign and Democratic candidate Bernie Sanders’ advocacy of Medicare for All.
“We talk about buying quality companies at a good price,” Hart says. “Sometimes that’s because of misunderstandings and volatility.” That includes health-care stocks. One of the fund’s holdings is
Bristol-Myers Squibb
(BMY), a large pharmaceutical company whose top sellers include cancer drugs Opdivo and Yervoy.
The stock, which trades at 9.2 times the 2020 consensus earnings estimate of $6.16 a share, per FactSet, yields about 3%. In November, the company closed on its $74 billion acquisition of Celgene, which “was actually bringing a different kind of pipeline” that includes hematology and immunology, says Hart.
The market wasn’t too high on the deal, sending shares of Bristol-Myers lower. Hart says the stock has been “unduly punished.”
Another holding is
UnitedHealth Group
(UNH), a large managed-care concern. Hart had followed the company for about five years, but its dividend yield never reached her 2% threshold until last fall. “The valuation got smacked because people thought the industry was going to go away,” she says of the recent political rhetoric. The yield has since slipped to 1.6% as the stock rebounded somewhat.
Hart expects that health-care reform “is going to be evolutionary, not revolutionary.” And she likes how the company doesn’t rely entirely on insurance alone. Its Optum unit’s businesses include assessing risk for various health-care clients.
Hart, for her part, has spent a lot of time assessing how risky an individual stock is—and she’s compiled an enviable record doing that.
Write to Lawrence C. Strauss at [email protected]
