Like other Matthews funds, the Matthews Japan Fund (Trades, Portfolio) aims to invest at least 80% of its assets in the region of focus — in this case, Japan. As of Dec. 31, the fund had $622.6 million in assets under management.
Taizo Ishida has served as the lead portfolio manager since 2006. Since the fund’s inception in December 1998, the fund has returned 5.01%, compared to the Tokyo Stock Price Index’s 2.9%.
During the fourth quarter, the fund purchased 49 new holdings; the following are the five largest new buys in terms of portfolio impact.
Fuji Heavy Industries (TSE:7270, Financial)
Matthews purchased 306,800 shares of Fuji at an average price of ¥3,931.68 per share. The stock accounts for 1.8% of the portfolio.
Fuji’s automobile segment produces and sells passenger cars and components, while the aerospace segment manufactures, sells, and repairs airplanes. The industrial segment sells generators and other engine-equipped machinery.
Over the past year, the company’s stock has been up 55%. When compared to the Peter Lynch earnings line, the stock may be undervalued as of September.
The operating margin has expanded significantly over time, recording at 13.5% in FY 2014. Over the past five years, the margin increased about 50%.
The Signature Select Canadian Fund (Trades, Portfolio) also purchased a stake in Fuji during the third quarter, with 131,200 shares.
Recruit Holdings (TSE:6098, Financial)
The second largest purchase in terms of portfolio impact was 246,400 shares in Recruit Holdings at an average price of ¥ 3,681.67 per share.
Recruit Holdings provides staffing services in Japan and overseas through its acquired subsidiaries. The company operates a number of platforms that connect clients (businesses) with job-seekers. The company also has a marketing media segment that provides information on life event operations such as real estate and weddings.
The company’s IPO launched in mid-October and has been up 3% since.
Anritsu Corp (TSE:6754, Financial)
Matthews purchased 938,300 shares of Anritsu at an average price of ¥815.20 per share. The holding had a 1.1% impact on the portfolio.
Anritsu is a Japanese company that specializes in producing test and measurement equipment. For the year ended March 31,2014, the company’s sales volume was more than ¥101.8 billion.
Over the past year, the stock has been down 23%, and may be undervalued when compared to the Peter Lynch earnings line.
Anritsu has a strong balance sheet with a current ratio of 2.7, meaning the company can easily cover its short-term obligations. Anritsu has also been paying off its long-term debt over time.
Omron Corp (TSE:6645, Financial)
The next largest new buy is 138,600 shares of Omron at an average price of ¥ 5,139.43 per share.
Omron manufactures and sells control systems and components for factory automation and industrial equipment.
The company’s operating margin has been steadily increasing, growing by about 27% over the past five years.
Omron has not carried any long-term debt since FY 2010, and has a current ratio of 2.4.
SMC Corp (TSE:6273, Financial)
Matthews purchased 23,400 shares of SMC at an average price of ¥ 30,613.77 per share.
SMC manufactures and sells automatic control equipment, sintered filters, and various types of filtration equipment.
Over the past year, the company’s stock has been up 34%, and may be overvalued according to the Peter Lynch chart as of October.
The operating margin has been steadily increasing over time, growing by 17% over the past five years. The margin was 27.44% for the trailing 12 months and is much higher than the industry median.
The current P/S ratio is 4.96, which is close to the five-year high.
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