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James Li
James Li
Articles (1349)  | Author's Website |

Hennessy Japan Small Cap Fund's Top 3rd-Quarter Trades

Fund specializing in Japanese small caps releases quarterly portfolio

The Hennessy Japan Small Cap Fund (Trades, Portfolio) disclosed this week that its top trades during the third quarter included a new position in Septeni Holdings Co. Ltd. (TSE:4293) and sells in the following three companies: Lifenet Insurance Co. (TSE:7157), Stella Chemifa Corp. (TSE:4109) and Okamura Corp. (TSE:7994).

Fund managers Tadahiro Fujimura and Takenari Okumura seek long-term capital appreciation through equity investments in the bottom 15% of all Japanese companies in terms of market cap. Hennessy Japan looks for companies with good management quality, earnings quality and balance sheet strength.

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Along with Hennessy Japan Fund (Trades, Portfolio) Manager Masakasu Takeda, Fujimura said in a September 2020 commentary statement that Berkshire Hathaway Inc.'s (NYSE:BRK.A)(NYSE:BRK.B) 5% investment in several major Japanese conglomerates "bolster" investor sentiment about investing in Japan. The fund managers said that the "sogo shosha" businesses fit Warren Buffett (Trades, Portfolio)'s investment style, adding that Buffett saw opportunities as share prices trade at discounts to fair value "due to mistaken perceptions by non-Japanese investors."

New buy: Septeni

The fund purchased 226,300 shares of Septeni, giving the position 0.67% weight in the equity portfolio. Shares averaged 206.68 yen ($1.96) during the third quarter.

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GuruFocus ranks the internet marketing company's financial strength 8 out of 10 on several positive investing signs, which include a high Altman Z-score of 3.35 and no long-term debt.

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Top sell: Lifenet

Despite establishing three new positions, the fund sold 141,500 shares of Lifenet, trimming the position 49.6% and its equity portfolio 1.14%. Shares of Lifenet averaged 1,103.71 yen during the third quarter.

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According to GuruFocus, the life insurance company's financial strength ranks 5 out of 10: Although it has no long-term debt, Lifenet's equity-to-asset ratio of 0.21 underperforms 53.46% of global insurance companies.

Stella Chemifa

The fund sold 39,300 shares of Stella Chemifa, trimming the position 68.23% and the equity portfolio 1.06%. Shares averaged 2,575.65 yen during the third quarter.

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GuruFocus ranks the chemical company's financial strength 7 out of 10 on several positive investing signs, which include a strong Altman Z-score of 3.15 and an interest coverage ratio that outperforms 81.34% of global competitors. Despite this, Stella Chemifa has a weak Piotroski F-score of 3 and a debt-to-Ebitda ratio that underperforms over 69% of global chemical companies.

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Okamura

The fund sold 105,800 shares of Okamura, trimming the position 64.67% and the equity portfolio 0.94%. Shares averaged 794.95 yen during the third quarter.

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GuruFocus ranks the company's financial strength 7 out of 10 on the back of debt ratios outperforming over 64% of global competitors, coupled with a high Piotroski F-score of 8 and a high interest coverage ratio of 67.31.

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Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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