Fidelity Japan Trust (LON:FJV) uses all the flexibility of the investment trust structure to maximise long-term capital growth potential. Manager Nicholas Price aims to identify companies whose growth prospects are undervalued or overlooked by the market. Nicholas is a Japanese speaker who has lived in Japan for many years, running portfolios since 2000. He personally, alongside Fidelity’s team of specialist analysts based in Tokyo, conducts hundreds of company meetings a year to root out undiscovered growth companies. The Japanese small and mid-cap space is vast and little covered by analysts, making this a good hunting ground for stockpickers.
Nicholas is index agnostic, though the portfolio has a mid-/small-cap growth tilt. Nicholas can also invest in unlisted companies, typically shortly before an expected IPO, currently representing 7% of the portfolio. The team has invested in this space for eight years and has built up a network which sees them presented with dozens of prospective unlisted companies each year. Additionally, Nicholas has run the portfolio with consistent levels of Gearing.
These factors have contributed to the trust seeing periods of strong outperformance, while it has also underperformed in falling markets (see Performance). Notably, 2022 was a tough year, as growth significantly underperformed value in a falling market, and gearing exacerbated FJV’s losses. However, 2023 has seen somewhat of a recovery, particularly in Japan, and Nicholas and the team think Japan looks set to perform well, while their portfolio is attractively valued versus history.
Fidelity Japan Trust shares have slipped onto a 10.6% Discount at the time of writing, wider than their own five-year average and the current Japan sector average too.
Read the full analysis from Thomas McMahon here:
