Forget laptops, my Japanese trust is all about robots – and ski slopes
ACTIVEA fund management may be on the wane as investors and financial advisersad increasinglyincr look for low-cost indexind tracking funds. But when it comes to investing in Japanese stocks, JP Morgan Asset Management’s Nicholas Weindling believes there is no other way.
Weindling, 39, who manages the JP Morgan Japanese Investment Trust, argues passionately that the only way to make serious money from the Japanese stock market is by ignoring iconic companies and hunting down the business winners of tomorrow.
He says: ‘There are 1,900 stocks listed on the Topix market, the Tokyo Stock Price Index. About 60 per cent are woefully under-researched. That provides plenty of opportunity for an active fund manager to find future success stories.
‘Equally, there are constituents of the index that have a large weighting, such as autos, consumer electronics and steel manufacturing. I steer clear of these because I see them facing structural problems.
‘It is why you will not see the likes of Canon, Hitachi, Nissan and Toshiba in the portfolio. Yes, great companies once, but not necessarily so great now.’ The result is that JP Morgan Japanese is littered with firms that do not register on the radars of British investors, but which are making great technological advances or responding to Japan’s changing society.
Factory automation and robotics are strong portfolio themes. ‘Japan is leading the world in these industries,’ he says. Among the companies he holds are Keyence, a profitable maker of sensors for production lines, and Fanuc, which builds industrial robots.
‘Fanuc’s robots are everywhere. They are used in car assembly lines, smartphone manufacture and in the food industry. They are the future,’ he adds.
Another dominant theme is Japan’s ageing and falling population – bad news for a lot of firms, but good for a select few.
‘The market in Japan for adult nappies is now bigger than that for baby nappies,’ he says. ‘It is why the trust holds a stake in incontinence pad maker Kao.
‘Similarly, the demand for medicines means pharmacies are thriving. But the sector is ripe for consolidation. This will happen as many stores that are run individually are swept up by bigger players, leading to greater market concentration.’ To benefit from this, the trust holds merger and acquisitions specialist Nihon, which Weindling believes will be involved in the sector’s reshaping.
A boom in tourism is also influencing the portfolio. Since 2012, the number of tourists has risen from 8 million to 21 million, attracted by the neon lights of Tokyo, the temples and Japan’s booming ski resorts.
Weindling says many tourists, especially those from China and Korea, use their visit to buy creams, beauty goods and condoms because of their quality and reliability. A key holding is Don Quijote, a retailer selling cosmetics and medicines.
Unlike most managers running Japanese portfolios for UK-based investment groups, Weindling – a Liverpudlian by birth – lives in Tokyo. He has been there since late 2006, is married to a Japanese woman and has two young children.
He also speaks the language fluently. ‘It is a great place to live and visit,’ he says. Indeed, after graduating in 1999, he spent two years teaching English in Hokkaido, Japan’s northernmost island, where he was often mistaken for a Russian.