Trustnet Magazine 55 October 2019 | Page 34

In focus [ TRUST ] 34 / 35 This trust’s manager Nicholas Price is moving into Japanese tech stocks on “trough valuations” Fidelity Japan FE TRUSTNET towards the lower end of the market cap spectrum than many of its peers. The trust has made 119.44 per cent since Price became manager at the start of 2015 compared with 73.12 per cent from its Topix benchmark and 81.69 per cent from the IT Japan sector average. FACT BOX MANAGER: Nicholas Price / LAUNCHED: 15/03/1994 / PREMIUM/DISCOUNT: -10.35% / OCF: 1.06% FE CROWN RATING PERFORMANCE OF TRUST UNDER MANAGER VS SECTOR AND INDEX Fidelity Japan Trust (119.44%) IT Japan (81.69%) TSE TOPIX (73.12%) 140% 120% 100% 80% 60% 40% 20% 0% b -20% (auto-related semiconductors) to his top-10 holdings on “trough valuations”. The portfolio now has 19.4 per cent of its assets invested in companies that make electrical appliances and another 13.2 per cent in telecom, media & technology. Price’s process involves conducting about 400 company meetings a year, assessing their barriers to entry, valuations, liquidity, and upside and downside potential. Analysts at Edison said the manager prefers businesses with strong brands and competitive positions with scope for international expansion. “The majority of the portfolio is made up of companies that are growing their sales and profits above average for their industry, supported by secular growth trends,” they added. “However, a smaller proportion is in turnaround situations that have T he Japanese tech sector took a tumble last year when concerns about the US/China trade war hit the global market. In particular, semiconductor stocks fell 50 per cent from their 2017 peak. However, Nicholas Price, manager of the Fidelity Japan trust, cautions investors against confusing correlation with causation. The manager is unconcerned about the recent setback for the sector – after its peak in 2018 he believes it will bottom out in the third and fourth quarters of 2019, meaning now could be an attractive buying opportunity. As a result, he said the biggest thematic change in his portfolio over the past year has been a shift towards the “steady, consistent growers” in the tech sector, adding Tokyo Electron (semiconductor production equipment) and Renesas Electronics suffered a temporary setback and are trading at historically low valuations.” Fidelity Japan changed its name from Fidelity Japanese Values in May 2018 as it switched its focus away from just small and mid cap stocks and towards an all cap strategy. However, the trust retains a higher exposure Source: FE Analytics trustnet.com