The T. Rowe Price Japan Fund (Trades, Portfolio) invests at least 80% of its assets in Japanese companies that can achieve and sustain above-average long-term earnings growth.
In T. Rowe Price’s fourth quarter commentary, the firm said Japanese equities performed well in local currency terms, but declined in U.S. dollars due to the weak yen. T. Rowe Price maintained IT and services as the largest sector in the portfolio, particularly staffing agencies due to signs of a tightening labor market.
The following graph shows the returns of the fund compared to the Lipper Japanese Funds Average.
During the fourth quarter, the fund purchased five new holdings. The following are the new stocks in order of portfolio impact.
Mitsubishi Corp (TSE:8058, Financial)
T. Rowe Price’s largest buy in terms of portfolio impact was 333,000 shares of Mitsubishi at an average price of ¥ 2,166.07 per share. On two other occasions, the fund had held shares in Mitsubishi, then sold out the following quarter.
Mitsubishi Corp operates in the industrial finance, energy, metals, machinery, chemicals, and environmental business.
The stock has been up 13% over the past year, and may still be undervalued when compared to the Peter Lynch earnings line.
One warning sign is the operating margin has been in long-term decline, recording at just 2.59% in FY 2014. Over the past five years, the margin has declined by 28%.
The current P/E ratio is 11.4, while the P/S ratio is 0.47.
FUJIFILM Holdings (TSE:4901, Financial)
The fund also purchased 117,800 shares of FUJIFILM at an average price of $3,707.84 per share.
FUJIFILM’s three operating segments are imaging, information, and document solutions. The company provides color film, digital cameras, printers, etc.
The stock has been up 40% over the past year and may be overvalued when compared to the Peter Lynch earnings line.
The current dividend yield is 0.63%, while the payout ratio is 15%. Over the past five years, the dividend has grown by an average of 10.5% per year.
Diluted EPS was ¥167.63 in FY 2014.
Recruit Holdings (TSE:6098, Financial)
T. Rowe Price bought 61,700 shares of Recruit Holdings for 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.
Ashikaga Holdings (TSE:7167, Financial)
The fund purchased 307,400 shares of Ashikaga Holdings during the quarter for an average price of ¥436.23 per share.
Ashikaga is the holding company of the Ashikaga Bank that provides various financial services in Japan. The company has 152 branches and more than 29,000 ATMs.
Ashikaga was nationalized in 2003 and went public in December 2013. Over the past year, the stock has been down 6%.
The current P/E ratio is 11.2, while the P/S ratio is 1.81.
Fujitech (TSE:6406, Financial)
The fifth largest new buy during the quarter was 88,100 shares in Fujitech at an average price of ¥1,157.49 per share.
Fujitech is involved in the manufacture, installation, and maintenance of elevators, escalators, moving walks, and vertical parking equipment.
The stock has been down 6% over the past year, and may be undervalued according to the Peter Lynch chart.
Diluted earnings per share has been increasing steadily since FY 2012. Over the past five years, diluted EPS grew by 16% and was ¥82.31 in FY 2014.
Fujitech’s operating margin has also been increasing steadily, recording at 8.75% in FY 2014.
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