The Matthews Japan Fund (Trades, Portfolio) disclosed that it initiated five positions when it released its second-quarter portfolio last week.
The fund’s largest holding was in the stock of medical supplies manufacturing company Terumo Corp. (TSE:4543, Financial), which sits in about 1.89% of the portfolio.
Other buys included: Coca-Cola Bottlers Japan Holdings Inc. (TSE:2579, Financial), Tateru Inc. (TSE:1435, Financial), Katitas Co. (TSE:8919, Financial), and Ferrotech Holdings Corp. (TSE:6890, Financial).
Many of the buys reported strong financial strength and good prospects for future earnings. At least one of the companies, however, had a poor Pitrioski F-Score, which suggested poor business operations. In some cases, the stock of the new holdings has jumped more than 80% over the last 12 months, and reported earnings growth of up to 70% over the same period of time.
In the second quarter, the Matthews Japan Fund (Trades, Portfolio) held a total of 59 stocks in a portfolio worth $4.56 billion. The portfolio experienced a 12% quarter-over-quarter turnover. The bulk of the portfolio is in stocks of technology, industrial, consumer cyclical, consumer defense and health care. Financial stocks and basic materials play a lesser role.
Portfolio managers Kenichi Amaki and Taizo Ishida seek long-term capital appreciation by investing in Japanese companies that are capable of sustainable growth.
Terumo Corp.
Terumo makes and sells medical products and equipment, including pharmaceuticals, nutritional food supplement, blood bags, disposable medical devices and cardiovascular systems among others. The cardiac and vascular business generates the largest proportion of revenue and sells cardiac and endovascular interventional therapies, cardiovascular surgical systems, neurovascular products and vascular graft products. The general hospital business includes diabetes management, consumer healthcare, drug and device technologies, and general hospital products. The blood management business sells blood component, therapeutic apheresis and cellular technologies. Terumo generates the majority of its revenue in Asia, with Japan contributing the largest proportion of Asian revenue.
The average purchase price was 6225 Japanese yen per share ($55.87 per share). A total of 1.5 million shares were purchased in the second quarter. Shares sat in about 1.89% of the portfolio. The total estimated gain since the inception of the trade was -4%.
On Monday, the stock sold for 6000 Japanese yen per share or down 1.8%. It increased 67% over the last three years. The Peter Lynch chart showed the stock traded above fair market value and therefore, it suggested that the stock is overvalued.
The stock traded at 25 times earnings, or higher than 67% of the companies in the Global Medical Instruments and Supply Industry.
It reported a dividend yield of 0.82%, which is lower than 65% of its peers in the Global Medical Instruments and Supplies Industry.
The stock is rated a 3-star based on GuruFocus’ Business Predictability Rankings, which characterizes a stock that has gained on average 8.2% a year over the last decade. The company reported average annual earnings growth of 6.7% a year over the last 10 years. It reported an average revenue growth per year of 7.4% in the last 10 years. It has experienced growth in profits and revenue.
GuruFocus ranks the company with a market cap of 2.16 yen and 7 in 10 in financial strength and 7 in 10 in profitability and growth.
Coca-Cola Bottlers Japan Holdings
Coca-Cola Bottlers Japan is a soft drinks manufacturer in Japan. Its revenue is primarily derived through the sale of bottled beverages. It also has a small portion of its business tied to sales of health foods and cosmetics. It operates through licensing agreements with Coca-Cola Co. (KO, Financial).
A total of 1.27 million shares sat in a portfolio space of 1.12%. The purchase price of the shares was about 4,545 yen per share. The investment has produced an estimated gain of -15%. The company sold for 3,850 yen in Tuesday trading.
The Peter Lynch chart showed the shares are traded above fair market value. That suggested that the shares are overvalued.
GuruFocus’ median price-sales chart indicates that the company traded above historical value.
The company traded at a 26 price-earnings, 1.27 price-book and 0.80 price-sales ratio. Its price-earnings ratio is lower than 82% of its competitors in the Global Beverages and Soft Drinks Industry. Its price-book ranked higher than 77% of companies in the same industry and its price-sales ranked 75% higher.
The company provides a dividend yield of 1.22%.
In earnings and revenue, it reported earnings of an average of 5.2% growth a year over the last 10 years. It reported revenue growth of 1.9% a year over the last 10 years. Average earnings growth climbed to 75% in the last 12 months, GuruFocus data showed. It produced revenue over the trailing 12 months of earnings of 143 yen per share on revenue of $987 million yen.
It has a market cap of 787 billion yen. GuruFocus ranked it 8 in 10 in financial strength and 6 in 10 in profitability and growth.
Tateru Inc.
Tateru, formerly known as Investors Cloud, is a Japan-based real-estate technology company. Principally, it is engaged in the development and operation of apartment management through the use of its various applications. The company offers services related to planning, design and construction of apartments, internet of things apartment building, and leasing or rental management. GuruFocus identified one severe warning sign, which is a Piotroski F-Score of 2, indicating poor business operations.
The Mathews Japan Fund purchased a total of 2.89 million shares of Tateru for an average cost of 2,065 yen per share. The traded price of the shares was 2,050 yen per share. The estimated gain since the purchase in the second quarter was -1%. The shares sit in about 1.04% portfolio space. Tateru stock has increased 87% over the last year. The Peter Lynch chart is incomplete, but it showed that the stock was traded above market value, which suggested that it is overvalued.
It reported average revenue growth over the last 12 months of more than 66% and average growth in earnings of more than 70% over the same period. The company reported rising profits in the last few years, while revenue jumped this year.
Tateru has a market cap of 169.8 billion yen. It is ranked 8 in 10 in financial strength and 5 in 10 in profitability and growth.
Katitas Co. Ltd.
Katitas, formerly Yasuragi Co. Ltd., operates in the housing market in Japan. It engages in the purchase, renovation and sale of second-hand houses.
A total of 1.187 million shares were purchased for a portfolio space of 0.92%. The cost of the shares was 3,868 yen a share. Shares on Monday were priced at 3,970 share. The total estimated gain on the investment was reported at 3%.
The company reported revenue growth of 9.4% in the last 12 months. Earnings growth was reported at a rate of more than 28%. The company has seen revenue and profits climb in the last two years when it reported business activity.
Katitas was ranked 6 in 10 in financial strength and 4 in 10 in profitability and growth. It has a market cap of 154.7 billion yen.
Ferrotech Holdings
Ferrotec Holdings is a manufacturer, marketer and distributor of advanced material, component and assembly solutions used in a broad array of end products, manufacturing systems and industries.
The company operates through four business segments. Its Electronic device segment manufactures thermo-electric modules, ferrofluid and power semiconductor substrate. The Equipment-related segment is engaged in the production and sale of vacuum seal, quartz products, ceramics and silicon products, silicon parts, and wafer products. Its Photovoltaic segment is involved in the formation of silicon crystal equipment, quartz crucible and silicon for the solar cell. The company's last segment is made up of laundry and other related industrial equipment.
A total of 2.53 million shares were purchased for an average price of 2,283 yen. The shares sat in 0.85% of the portfolio. The investment has produced an estimated gain of -34%. Shares were priced on Monday at 1,500 yen a share.
The company traded at 20 times earnings, which was higher than 61% of its competitors in the Global Diversified Industrials Industry. It traded at a forward price-earnings of 10, which was not rated. It reported price-book of 1.10 and price-sales of 0.59. Both ratios were at least 51% higher than its peers. The Peter Lynch chart, though incomplete, suggested that the stock was above its fair market value, which could mean the stock is overvalued.
The company reported a dividend yield of 1.57%, which is close to a five-year high.
The company posted a profit in recent years as revenue soared in the last 12 months. It reported an annual revenue growth rate of 3.5% a year over the last 10 years and about 8.75% over the last 12 months. Earnings growth stood at 0.70% over the last 12 months.
GuruFocus ranks the company with a market cap of $56 billion yen with 6 in 10 in financial strength and a 7 in 10 in profitability and growth.
