Finding the Long Term Winners in Japan

August 2017
Archibald Ciganer , Portfolio Manager

 

The Japan Equity Fund is an all-cap strategy based on bottom-up fundamental investing. Our edge in Japan as T.Rowe Price, is to have a strong research team on the ground that is complimented with a global research team and I use the insights of our research analysts to find companies that fall in two categories. The first category is what I call ‘durable growers’. So companies that benefit from a secular tailwind and will be able to grow in the medium to long-term and the second category is what I call ‘transformation stories’, which is companies that might go through restructuring or a change in management, change in strategy. In both cases, you can find stocks where the outlook is not appropriately priced by the market and these opportunities are fairly difficult to identify, if you don’t have the research base and the constant contact with companies. So I think it plays to our strengths to invest that way and that is the driving force for the way I run the strategy.

 

I believe that quality outperforms over time. It’s certainly the case in Japan and the way we invest, which is based on fundamental research, naturally leads us towards higher quality companies because those are the companies that are sustainably competitive over the long-term. The end product is a portfolio of between 60 to 100 stocks, currently about 80 and it’s a buy and hold strategy with a medium to long-term orientation. So I tend to run stocks for three to five years. At least, I need to be comfortable with a three to five year outlook in order to buy a stock and because it’s more of a buy and hold strategy, turnover is fairly low and it’s currently below 30%.

 

T.Rowe is blessed with a strong local team in Japan. We have a team of very experienced research analysts and on top of that, we have the global research platform and the interaction between the two is extremely valuable. Communication is very smooth and that allows us, allows me to identify powerful trends or changes in environments, macro environments, regulatory environments and allows me to find stocks in Japan that might benefit from those trends or changes. That’s a luxury that most of our competitors don’t have, to have both boots on the ground and the global research team.

 

My focus running the strategy is squarely on medium to long-term capital appreciation. I do not really worry about short-term fluctuations. Accordingly, I think the fund is suitable for people who don’t need to worry about short-term volatility and are comfortable owning a portfolio of long-term winners that will appreciate over time.

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Japanese Equity
RELATED FUND
SICAV
Class A EUR
ISIN LU0230817339
Seeking to uncover the best investment opportunities across the Japanese equity spectrum.
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YTD
Return
14.21%
Fund Size
(EUR)
€1.1b
1YR Return
-1.85%