Fidelity Japan Trust: Opportunities from the mother of invention

Necessity, as they say, is the mother of invention. In this note, we explore how a long-term core Fidelity Japan Trust plc (LON:FJV) investment thesis has been identifying the opportunities arising as Japan innovates, inter alia addressing the global necessities of digitalisation and de-carbonisation, as well as the domestic demands from delayed domestic reopening. Japan’s record on innovation is market-leading, which, when combined with FJV’s unique competitive advantages in bottom-up stock selection and a flexible mandate allowing unlisted investments, has contributed to long-term outperformance. Short-term style rotation has led to weakness, but five-year NAV growth is 1.4x the index.

  • FJV’s unique value add: Fidelity Japan Trust’s approach is “growth at a reasonable price”. Companies growing because of innovation have a natural fit to the first element. FJV’s long local presence gives it advantages over global investors, while its deep, global analytical reach is a competitive advantage over smaller, national ones.
  • Recent performance: After material long-term outperformance, as outlined in our note, FJV: 10 questions for the AGM on 17 May 2022, style headwinds have seen material 2022 underperformance. Historically, after such periods, outperformance has been sharp. The three-month NAV outperformance is 2.5%.
  • Valuation: 94% of investments are listed in active markets. While some may have a degree of illiquidity, the NAV is “real”. The discount of 9% is above the average of recent levels, but it is slightly above that of its peers, whom FJV has materially outperformed over five years. FJV is run for capital growth.
  • Risks: FJV has seen periods of short-term underperformance, when its investment style has been out of favour – typically, when the market has undergone a sharp factor rotation, but recovery has usually been swift. Early 2022 performance may affect sentiment for a while. There are also some Japan sentiment issues.
  • Investment summary: Fidelity Japan Trust has outperformed its peers, benchmarks and UK indices, with a distinctive and active investment approach. Its companies show faster-than-average EBITDA growth (2023E ca.1.3x and 2024E 1.8x the market, respectively), and have higher ROEs and ROICs (both around one third above the market). It invests for “growth at a reasonable price” (GARP) – so company valuations are usually higher. With an active approach, investors are buying FJV’s investment process, not its portfolio on a given day. Japan offers tech-enabled growth and structural reforms, and it is levered to global trade. Its approach can be out of favour, but, under the manager’s tenure, underperformance periods have been short.


Click to view all articles for the EPIC:
Or click to view the full company profile:
Share on facebook
Share on twitter
Share on linkedin
Hardman & Co

More articles like this

Fidelity Japan Trust

Japan’s stock market approaching all-time highs

On February 16, the Nikkei Stock Average continued its upward climb on the Tokyo Stock Exchange. At one point, the stock market surge exceeded ¥700 JPY ($4.67 USD. That edged within ¥50 of the all-time high of ¥38,915.87 ($259.49), set on

Fidelity Japan Trust

Japanese shares reach 34-year high as European stocks slip

Japanese shares touched a 34-year peak on Tuesday, while European stocks and S&P 500 futures slipped as investors waited for a U.S. inflation report that could shape Federal Reserve policy. Treasuries and the dollar were little changed before

Fidelity Japan Trust

Japanese stocks rise for second session

Stocks in the Asia-Pacific region were mixed Monday, Feb. 5, with the Japanese market showing a second day of increases and shares in Hong Kong declining for the second day. The Hang Seng Index Hang Seng Index of

Fidelity Japan Trust

Tokyo stocks rise on weaker Yen and Dow Jones high

Tokyo stocks rose Monday morning as exporter issues were bought on the back of a weaker yen, with sentiment further buoyed by the U.S. Dow Jones index hitting an all-time high late last week. The 225-issue Nikkei Stock

Fidelity International

Fidelity Japan Trust 12% annual share price return in 2023 impresses

Fidelity Japan Trust PLC (LON:FJV) published its monthly factsheet for the period ended December 2023. Portfolio Manager Commentary The Trust recorded NAV returns of 12.2% over the 12 months to December 2023, underperforming the reference index, which returned 13.3%.

Fidelity Japan Trust

Nikkei reaches 34-year high

Tokyo stocks closed higher on Monday with the Nikkei index up for a sixth trading day to end at a fresh 34-year high, while robust retailer earnings further lifted the market sentiment. Japan’s benchmark Nikkei stock index, the

Fidelity Japan Trust

Japan’s stock market outlook bullish for 2024

The Japanese stock market had an extraordinary 2023 by several measures. The 28% gain of the benchmark Nikkei 225 last year was its fastest expansion in a decade, while it ended the year at 33,464.17 – the highest

Fidelity International

Fidelity highlights wealth of Japan investment trust opportunities

Fidelity Japan Trust PLC (LON:FJV) published its monthly factsheet for the period ended November 2023. Portfolio Manager Commentary The Trust recorded NAV returns of 2.4% over the 12 months to November 2023, underperforming the reference index, which returned 8.9%.

Fidelity Japan Trust

Tokyo stocks end higher

okyo stocks rebounded on Tuesday amid buying of exporter and tech-related issues after the Japanese central bank decided to maintain its ultra-loose monetary policy. Japan’s benchmark Nikkei stock index, the 225-issue Nikkei Stock Average, ended up 460.41 points,

Fidelity Japan Trust

Japan’s Nikkei follows Wall Street higher

apan’s Nikkei share average rose for a second straight session on Tuesday after Wall Street closed at fresh highs for the year, while investors awaited key U.S. inflation data and the Federal Reserve’s policy decision for further direction.

Fidelity Japan Trust

Tokyo inflation cools to slowest pace in over a year

Inflation in Tokyo cooled to the slowest pace in over a year, a development that supports the Bank of Japan’s view that price pressures are weakening for now and that it should continue to be cautious about a

Fidelity Japan Trust

Why Japan is home to the world’s oldest businesses

There are so many 100-plus-year-old companies in Japan that there’s a word for them in Japanese: shinise. What is it about doing business in Japan that cultivates such an enduring legacy? Shitennō-ji temple is one of Osaka’s most important

Fidelity Japan Trust

Japan shares hit three-decade high

Japanese shares hit highs not seen since 1990 on Monday as strong earnings and offshore demand fuelled a three-week winning streak, while the yuan was pushed higher by China’s central bank leading to broader softness in the dollar.

Fidelity Japan Trust

Japanese stocks rise for second day

Stocks in the Asia-Pacific region mostly rose Tuesday, Nov. 14, Japanese shares climbing for the second session. The Hang Seng Index HSI, -0.17% of Hong Kong companies dropped 0.2% to 17,396.86, while Japan’s Nikkei 225 Index NIK, +0.34%

No more posts to show