Page 24 - DIY Investor Magazine - Issue 25

TAKING THE LONG VIEW ON JAPANESE GROWTH
The JPMorgan Japanese Investment Trust offers investors capital growth opportunities from a market often overlooked by UK investors.
Nicholas Weindling Fund Manager
Investors searching for opportunities in today’s uncertain
world may well overlook Japan. Economic headlines about the country could be discouraging: 2019’s consumption tax hike and GDP fall, followed by coronavirus and its effects (such as postponement of the Tokyo Olympics), and recession. But look behind the headlines, beyond the Dow, and Japan is home to a number of best-in-sector companies with exciting futures. The JPMorgan Japanese Investment Trust offers the opportunity to tap into their growth.
BACKING WINNERS
Of course, Japan is not immune to global uncertainty. It is by nature more cyclical than other developed markets and can therefore be commensurately more impacted, both positively and negatively by the slings and arrows of economic fortune.
However, rather than trying to predict the direction of the Japanese market and the global economy, The JPMorgan Japanese Investment Trust focuses on generating long-term capital growth from attractively valued investment themes and individual stocks.
Tokyo-based portfolio manager Nicholas Weindling, explains: ‘The companies we have invested in have strong structural growth outlooks, competitive positions and balance sheets.
We believe they will perform well in the long-term regardless of the performance of the wider global economy. Backing long- term winners means that the earnings of our companies are less volatile.
UNKNOWN STRENGTHS
The trust’s focus on the long-term (and that it is unconstrained by sector and market cap) means it can avoid structurally weak sectors such as steel, banking and automotive. Low-growth, old economy stocks – household names such as Canon, Toyota and NEC – dominate these sectors, and Japanese ETFs.
Instead, explains Weindling, companies on the trust’s portfolio ‘are becoming household names or are well-known but people don’t know they are Japanese’. These highly-investible companies could be hidden in plain sight.
For example, most job-seekers who have used Indeed, the world’s number one online recruitment website, will be unaware that its parent company, Recruit, is a Japanese-owned business.
ON BALANCE
Investing in the growth of Japanese companies like Recruit has been made easier by Japan’s corporate governance ‘revolution’ (or at least, modernisation). While a few years ago it would have been hard to talk about dividend yield in relation to Japanese companies, changes to regulations around corporate governance have enabled companies to offer buybacks and dividends.
In contrast to dividend suspensions in Western markets, they have generally continued to do so.
DIY Investor Magazine | Sept 2020 24