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Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan Japanese. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
The valuation of JFJ’s high-growth portfolio looks cheaper after last year’s sell-off…
Overview

JPMorgan Japanese (JFJ) invests in high-quality Japanese companies with strong growth prospects. The trust is managed by Nicholas Weindling and Miyako Urabe. They are based in Tokyo along with a large analyst team, which provides them with insights into the idiosyncratic growth opportunities available in the country, particularly in the under-researched small and mid-cap space.

Japan has been a popular pick for international investors this year, and Nicholas and Miyako share the optimism. The country is undergoing a cyclical upswing, unlike the West, with the domestic economy being boosted by the belated ending of pandemic restrictions in 2022 and modest consumer and wage inflation. The managers also highlight ongoing corporate governance reforms as a reason to be bullish about the country in the short and long term: in the short term these reforms are providing stock-specific opportunities, and in the long term they could present an avenue by which the historic valuation discount of the Japanese market versus its international peers is closed.

JFJ’s quality-growth bias worked against it in 2022 as the market fell, but in 2023 it has returned to form in a rising market (see Performance). In the long run, the quality-growth style of the managers has added value versus the index, and they argue that the long-term growth outlook for their portfolio hasn’t changed much overall, while valuations are more attractive. Despite the disruption of last year, turnover was low, with the managers viewing the sell-off as a re-rating of businesses performing well operationally and with good growth prospects.

JFJ’s shares trade on a discount of 8.4% at the time of writing, more-or-less in line with the five-year average of 7.3%.

Kepler View

Japan is a great place for stock pickers given how little analyst coverage it receives, particularly in the small and mid-cap space. This is likely due to it being an afterthought for many investors, with the typical investor underweight the country. We think the current optimism around the country could see this underweight close, which could provide strong technical support for the market. In the short term, the economy is looking stronger than the West, with inflation moderate and consumer activity growing. However, in the long-term, it is corporate governance reforms which are likely to be most significant. Business culture in Japan is rapidly changing, with companies becoming much more focussed on shareholder returns. This is slowly drawing back in foreign investors and could be a potential driver of a re-rating of the whole market, as well as providing opportunities for stock-specific gains in the meantime.

We think JFJ is an attractive way to invest in the exciting growth opportunities in Japan. The team is based on the ground in the country, which gives them insight into companies as well as economic and cultural trends. They have a good track record of adding value over the long term, even if 2022 was a rough year for their quality-growth style. The portfolio is full of companies that only Japan offers, such as the world leaders in robotics and companies profiting from Japan’s unique demographic challenges.

Bull

  • Highly active approach increases the chance of outperformance
  • Deep resources devoted to stock picking in an under-researched market
  • Japanese equities look attractively valued, as does the currency

Bear

  • Gearing can enhance losses on the downside
  • Strong style bias and active approach may lead to periods of underperformance
  • Investors take single-country political, currency and economic risk
Continue to Portfolio

Fund History

27 Sep 2023 Ohayō Japan!
Our analysts discuss what they think may be a new dawn for the Land of the Rising Sun...
17 Aug 2023 Fund Analysis
The valuation of JFJ’s high-growth portfolio looks cheaper after last year’s sell-off…
02 Mar 2023 The Devil’s in the demographics
China’s population is in decline - should it turn east or west for inspiration..?
28 Feb 2023 Fund Analysis
JFJ’s portfolio of high-growth businesses looks cheap as sentiment improves…
15 Feb 2023 Lost in translation
We argue Japanese equities look attractive on both a short and long-term view…
25 May 2022 Fund Analysis
Recent markets may offer an opportunity to ‘buy the dip’ in JFJ’s attractive growth opportunities…
03 Nov 2021 Don't fear the reaper
With market direction hard to call, we consider the case for taking a long-term view in the investment trust sector…
29 Sep 2021 Slings and arrows
Our analysts argue over whether it’s better to take arms against volatility in a portfolio, or to simply suffer it…
22 Sep 2021 Fund Analysis
JFJ trades at an attractively wide discount, and this could be a chance to ‘buy the dip’…
31 Mar 2021 Fund Analysis
JFJ continues to be at the heart of Japan’s new growth, with a portfolio of quality growth stocks that has delivered long term outperformance…
28 Jan 2021 Big game
Two of our analysts go head-to-head on the question of whether SMT’s stampede can continue…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
16 Dec 2020 My haven’t you grown!
How sustainability has gone from zero to hero in 2020…
02 Dec 2020 Can you teach an old dog new tricks?
Cheap companies in Japan are drowning in what cheap companies elsewhere would kill for: buckets of cash…
05 Nov 2020 Fund Analysis
JFJ has outperformed post COVID-19 through its portfolio of Japanese growth stocks but remains at a discount….
20 May 2020 Riding for a fall?
We consider the risks which could derail the multi-year tech boom…
19 Feb 2020 Fund Analysis
JFJ invests in high-quality Japanese companies with structural growth drivers…
28 Nov 2019 Is there a generational opportunity in Japan?
Two of our analysts go head-to-head, arguing the case for Japan...
24 Jul 2019 Fool's gold?
We examine the relationship between how much a fund costs and how it performs, with surprising results...
22 May 2019 On a roll
As Western economies show signs of their own 'Japanification', we explore the Japanese industries poised to take advantage of this change...
10 Apr 2019 Fund Analysis
JPMorgan Japanese (JFJ) aims to maximise capital growth from a portfolio of high-quality companies in Japan...
06 Sep 2018 Bullseye
The third arrow of Shinzo Abe's grand plan, corporate reform, puts undervalued Japanese equities in a very attractive position...
05 Sep 2018 Fund Analysis
JPMorgan Japanese Investment Trust explores investment opportunities across the market cap spectrum, including mid-small cap stocks with high growth characteristics...
14 Dec 2017 Race to the bottom
Ahead of the new PRIIPS rules we examine the progress investment trust boards are making in reducing costs...
14 Dec 2017 Fund Analysis
A growth-orientated Japan equity trust run by a highly-resourced team that has very low operational costs
View all

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