Japanese equities are starting to hit the headlines again after a period of being out of favor with investors.
Over the last few weeks, managers and investors alike have started highlighting Japan as an area where they’re increasingly optimistic due to prospects of higher dividends and good value.
T. Rowe Price global equity manager Sebastian Mallet, in a recent commentary, said many Japanese stocks were ‘disproportionately’ cheap based on fundamentals and Chile brokerage giant Sura has also started increasing its allocation to the asset class.
Out of 125 managers who currently have a five-year track record in Equity Japan, only two have managed to consistently outperform their peers, with the average manager having returned 47.9% over this timeframe, while the benchmark for this sector, the Topix 1000 TR, has returned 52.1% over this period.
Five-year total return: 139.25%
Best year of performance vs. average manager: +26.63% in 2012
Citywire A-rated Taeko Setaishi has consistently stayed near the top performers in the Japanese equity sector. A manager for Japanese-based Atlantic Investment Management, which she joined in 1996, she has been managing its Atlantic Japan Opportunities fund since 2003.
The small fund, with only $49.1 million invested according to its December factsheet, has 62 positions in mainly small-cap holdings.
The top three stocks in her portfolio include motor manufacturer Nidec Corp, biotech firm PeptiDream, and Japan Material Co.
Five-year total return: 77.6%
Best year of performance vs. average manager: +6.16% in 2015
Australian-born, Singapore-based Dean Cashman has also kept his performance steady by staying true to his high-conviction, contrarian style.
The Citywire AA-rated manager noted a widening ‘valuation dispersion’ in Japanese stocks which had offered investment opportunities for his funds, in an interview with Citywire Americas in May last year.
The manager of the $1.8 billion Eastspring Investments Japan Dynamic fund and the $2.5 billion Eastspring Investments Japan Fundamental Value fund, pinpointed Japanese banks as key contributors to his fund at the end of November.
He said that banks, like Mitsubishi UFJ Financial Group, have been operating in a low interest rate environment for a long time and have been diversifying by taking more fee and commission income for their services rather than relying on the domestic interest rate cycle.