Scott McGlashan has specialised in the Japanese stockmarket for the last 28 years and managed the JO Hambro Japan Fund since inception in 2004. It is up 5.1% so far this year.
The Japanese market has often disappointed investors, but McGlashan believes there’s money to be made if you know where to look. The average price-to-book ratio in Japan is at an almost 40-year low. There are also many profitable firms with share prices that value them below book value. Yet many Japanese firms paid down their debt prior to the credit crunch and are now reporting record cash flows – that should lead to an increase in dividends.
“Investors appear to be ignoring the strong results posted by Japanese companies in the first quarter,” says McGlashan. Companies have also cut costs and look to have achieved a “permanent reduction of their breakeven points”. If true, the Japanese market “trading at book value, is simply too cheap”.
The fund holds firms with attractive yields, including Casio Computer (2.8%) and Daiwa Securities (4%). It doesn’t hold many big names as McGlashan believes there are more opportunities in small- and medium-sized stocks whose prospects have been overlooked. One exception is Honda. The share price dropped after news of strikes at its manufacturing facilities in China, but McGlashan tells Rob Morgan of Hargreaves Lansdown that this is an “overreaction”. The firm enjoys high production levels and has significant exposure to emerging markets.
McGlashan’s fund is an “excellent choice for exposure to attractively valued Japanese stocks”, says Morgan.
Contact: 0207-747 5678.
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JO Hambro Japan Fund top ten holdings
| Name of holding | % of assets |
|---|---|
| Casio Computer | 3.5 |
| Honda Motor | 3.4 |
| Sumitomo Trust Banking | 3.2 |
| Rohm | 3.0 |
| Bank of Kyoto | 3.0 |
| Keio Electric Railway | 3.0 |
| Mabuchi Motors | 2.9 |
| JX Holdings | 2.8 |
| Daiwa Securities | 2.5 |
| Tokai Tokyo Securities | 2.5 |