With all eyes on Japan, don’t miss this top performer
THERE are about 3,500 listed companies in Japan, almost twice as many as in London and several hundred more than in New York.
Even though the Japanese stock market is huge, many of the firms quoted on it are small, receiving little or no attention from analysts and brokers. That presents an opportunity for those who are prepared to look a little harder, such as Nicholas Price, who runs the Fidelity Japan Trust.
Price has lived and worked in Japan for 26 years, speaks fluent Japanese and has developed an extensive network of contacts across the country. He meets representatives of at least 350 companies each year, visiting t heir factories, talking to their managers and looking for businesses with bright prospects.
Price took over the Japan Trust in 2015, since when he has seen about 1,500 businesses. Today, the Trust invests in 82 firms, so Price casts the net wide in his search for pearls.
The approach has yielded results in that the value of the companies within the Trust has increased by an average of more than 20 per cent a year since September 2015. Yet the share price fails to reflect this performance.
On Friday, the shares closed at £1.55, even though the assets within the trust are valued at the equivalent of £1.73 a share. The 10 per cent discount is higher than almost all of Fidelity Japan Trust’s peers, even though the group’s performance is better than most of them.
The discrepancy may be frustrating for Price and his team. For investors, however, it presents an opportunity, especially with all eyes on Japan this weekend.
Fidelity is the largest investment management firm in the world and has been operating in Japan for 50 years, longer even than it has been in the UK. The combination of the firm’s experience with Price’s know-how is powerful.
Price is helped by a team of 13 analysts, as well as colleagues across Asia. These researchers help unearth potential investment opportunities and can also talk to companies’ suppliers and customers to give the Trust a rounded idea of what businesses are like before adding them to its portfolio.
Companies range from wellknown global firms, such as musical instrument maker Yamaha, to niche operators such as Kamakura Shinsho, the leading online provider of gravestones and funeral services.
The field may seem macabre, but Japan has an ageing population and the number of deaths is forecast to rise every year until at least 2040.
The Japanese spend an average of £7,700 on funerals, so they want to ensure they find the best service. Kamakura Shinsho acts like an online platform, showing mourners all the options available to them, including price and location.
Japan Trust invested in the stock in 2017, since when it has almost tripled in value.
The group’s top investments also include bicycle components firm
Shimano, and Kose, a multinational cosmetics group.
These companies have been deliberately selected because they are likely to do well regardless of the economic cycle. Price is also a keen believer in certain technology stocks, which are expected to move ahead over the coming year, as 5G broadband is rolled out in Japan and beyond.
Across the board, the Trust aims to find firms that have been overlooked by others and are likely to increase substantially in value.
Price monitors the portfolio continually, selling investments wholly or in part if he believes there are more gains to be had elsewhere.