The T. Rowe Price Japan Fund (Trades, Portfolio) acquired four new holdings in the final quarter of 2016. The new holdings are Sumitomo Electric Industries Ltd. (TSE:5802, Financial), Komatsu Ltd. (TSE:6301, Financial), Nidec Corp. (TSE:6594, Financial) and istyle Inc. (TSE:3660, Financial).
The fund was established in 1991 and is managed by Archibald Ciganer. The fund seeks long-term growth of capital by investing primarily in Japanese companies that can achieve and sustain above-average, long-term earnings growth. The portfolio is currently composed of 76 stocks with a total value of $420 million.
The Japan fund purchased 447,600 shares of Sumitomo Electric Industries for an average price of 1,568.88 yen ($13.75) per share. The holding is 0.06% of the company’s shares outstanding and represents 1.5% of the fund’s total assets managed.
Sumitomo Electric manufactures and sells electric wires and cables for the automotive, communications, energy, industrial materials and other industries. It has a market cap of 1.3 trillion yen and an enterprise value of 1.8 trillion yen. Its shares were trading around 1,639.5 yen Tuesday with a price-earnings (P/E) ratio of 13.9, a price-book (P/B) ratio of 1.02 and a price-sales (P/S) ratio of 0.5.
The Peter Lynch chart below suggests the stock is trading below its intrinsic value.
GuruFocus ranked Sumitomo Electric’s financial strength 7 of 10. The Piotroski F-Score of 5 and Altman Z-Score of 2.6 suggest the company is in stable condition but does have minor financial stress. The cash-debt ratio of 0.4 and interest coverage ratio of 28.13 suggest the company is not able to cover its debt with cash on hand. The company is destroying value as it grows because the return on invested capital (ROIC) underperforms the weighted average cost of capital (WACC).
Sumitomo Electric’s profitability and growth was ranked 7 of 10 by GuruFocus. It has an operating margin of 4.9% and a net margin of 3.4%. The return on equity (ROE) and return on assets (ROA) outperform 57% and 55% of other companies in the global electronics distribution industry. The return on capital (ROC) outperforms 54% of competitors.
The fund is the only guru invested in Sumitomo Electric.
The fund bought 187,200 shares of Komatsu for an average price of 2,503.42 yen per share. The fund holds 0.02% of the company’s shares outstanding, which represents 1.01% of its total assets managed.
Komatsu manufactures and sells construction and mining equipment and industrial machinery. It has a market cap of 2.5 trillion yen and an enterprise value of 2.88 trillion yen. Its shares were trading around 2,674.5 yen on Tuesday with a P/E ratio of 22.9, a forward P/E ratio of 23.04, a P/B ratio of 1.7 and a P/S ratio of 1.4.
The Peter Lynch chart below suggests the stock is trading above its intrinsic value.
GuruFocus ranked Komatsu’s financial strength 7 of 10. The Piotroski F-Score of 4 and Altman Z-Score of 3.6 indicate the company is in stable condition. The cash-debt ratio of 0.23 and interest coverage ratio of 22.4 suggest the company is not able to pay its debt with cash on hand. Since the ROIC underperforms the WACC, the company is destroying value as it grows.
The company’s profitability and growth was ranked 6 of 10 by GuruFocus. It has an operating margin of 9.8% and a net margin of 6.3%. The ROE and ROA outperform 69% and 76% of other companies in the global farm and construction equipment industry. The ROC outperforms 65% of competitors.
David Herro (Trades, Portfolio) has the largest holding of Komatsu among the gurus. He holds 0.99% of shares outstanding, which represents 0.9% of his total assets managed. Causeway International Value (Trades, Portfolio) and the Matthews Japan Fund (Trades, Portfolio) also hold positions.
The fund acquired 34,000 shares of Nidec for an average price of 9,951.83 yen per share. The holding is 0.01% of the company’s shares outstanding. This represents 0.7% of the fund’s total assets managed.
Nidec manufactures electric motors and related components and equipment. It has a market cap of 3.13 trillion yen and an enterprise value of 3.13 trillion yen. Its shares were trading around 10,555 yen on Tuesday with a P/E ratio of 34.1, a forward P/E ratio of 25.3, a P/B ratio of 4.1 and a P/S ratio of 2.7.
The Peter Lynch chart below indicates the stock is trading above its intrinsic value.
GuruFocus ranked the company’s financial strength 7 of 10. The Piotroski F-Score of 5 and Altman Z-Score of 4.9 suggest the company is in stable condition. The cash-debt ratio of 1.02 and interest coverage ratio of 56.02 indicate the company is able to cover debt and interest expenses using cash on hand. The company is creating value as it grows because the ROIC outperforms the WACC.
Nidec’s profitability and growth was ranked 7 of 10 by GuruFocus. It has an operating margin of 10.6% and a net margin of 7.8%. The ROE and ROA outperform 72% and 74% of other companies in the global diversified industrials industry. Similarly, the ROC outperforms 72% of competitors.
The Matthews Japan Fund is Nidec’s largest shareholder among the gurus with 0.3% of shares outstanding. This represents 2.2% of its total assets managed. The Hennessy Japan Fund (Trades, Portfolio) also holds a position.
The fund purchased 108,300 shares of istyle for an average price of 765.83 yen per share. It holds 0.2% of the company’s shares outstanding, which represents 0.2% of its total assets managed.
The company operates a cosmetics website portal. It has a market cap of 46.3 billion yen and an enterprise value of 44.7 billion yen. Its shares were trading around 801 yen Tuesday with a P/E ratio of 50.9, a P/B ratio of 7.8 and a P/S ratio of 3.7.
The Peter Lynch chart below indicates the stock is trading above its intrinsic value.
GuruFocus ranked istyle’s financial strength 7 of 10. While the Piotroski F-Score of 3 indicates the company has a poor business condition, the Altman Z-Score of 6.7 implies the company is in good financial condition. The cash-debt ratio of 1.4 and interest coverage ratio of 196.6 suggest the company is able to cover debt and interest expenses. The ROIC outperforms the WACC so the company is creating value as it grows.
The company’s profitability and growth was ranked 7 of 10 by GuruFocus. It has an operating margin of 10.5% and a net margin of 6.4%. The ROE and ROA outperform 78% and 75% of other companies in the global internet content and information industry. The ROC outperforms 67% of competitors.
T. Rowe Price Japan is the only guru invested in the company.
For all of the fund’s current holdings, view its portfolio.
Disclosure: I do not own any stocks mentioned in the article.
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