Fidelity Japan (FJV)

Nicholas Price has been at the helm of the Fidelity Japan Trust (FJV) since September 2015, consistently applying a growth-at-a-reasonable-price (GARP) investment philosophy. His strategy focusses on identifying companies with solid growth potential that are undervalued relative to their projected earnings and capitalising on market inefficiencies in pricing future growth.

It’s been a busy 12 months, with market turbulence prompting Nicholas to make some adjustments to FJV’s portfolio. Several companies, despite maintaining strong fundamentals, have seen their valuations fall to more attractive levels – an opportunity Nicholas has seized. This is exemplified by his decision to increase the trust’s stake in Miura. More broadly, he has added opportunities in typical large-cap sectors, where companies are moving from value to growth. Nicholas has also taken profits from several of FJV’s strongest performers, including semiconductor equipment maker Tokyo Electron, reallocating the proceeds to more attractive opportunities elsewhere in the market.

Whilst Nicholas remains underweight in financials overall, he has selectively added to individual names in the sector over the last 12 months (see Portfolio), including increased allocations to mega bank Mizuho Financial Group and consumer finance company Credit Saison, and a new position in insurer Sompo Holdings. These moves are designed to capture the upside potential offered by a supportive backdrop for the sector and company-specific drivers, whilst also helping to mitigate some of the impact from value style headwinds.

Despite strong results from several stocks over the past 12 months, a combination of stock-specific detractors and a challenging market environment resulted in weaker relative Performance. One area under pressure has been FJV’s allocation to small- and mid-cap growth stocks, which have underperformed their value-oriented counterparts further up the market-cap scale. However, Nicholas maintains that they offer greater alpha potential, especially compared to larger firms, and could rebound quickly given the right catalysts.