During the first quarter, the Matthews Japan Fund (Trades, Portfolio) acquired three new stocks whose prices surged during the period, according to GuruFocus Real Time Picks.
According to the first quarter commentary, the fund’s investor class appreciated 17.39%, outperforming its benchmark, the MSCI Japan Index, which returned 10.34%. The fund managers noted that Japan experienced a rally due to the Bank of Japan’s monetary easing, and Japanese corporate earnings reached historical highs in 2014. The fund remains optimistic due to continued wage growth and improving shareholder returns.
“Initial results from wage negotiations between unions and management have shown acceleration in wage growth compared to last year,” the managers wrote. “Coupled with the rapid decline in fuel prices, we believe there are sufficient grounds for a consumption-driven recovery.”
Financial Products Group Co Ltd (TSE:7148, Financial)
The fund’s largest purchase during the quarter was 1,156,500 shares of Financial Products Group for an average price of ¥853.39. The holding has a 1.71% portfolio weighting. The company creates and sells tax planning products to wealthy business owners. The fund wrote in the quarterly commentary that demand has increased due to business owners looking to defer more taxes ahead of a scheduled corporate tax cut.
Over the past year, the stock has increased a whopping 258%, and currently trades at ¥1,247, with a P/E ratio of 27.6 and P/S ratio of 11.49.
The positive outlook on the company may stem from that net income has steadily increased over time, rising by more than 45% over the past five years. In 2014, Financial Products Group reported net income of ¥1,989 million.
The current dividend yield is 0.7%, while the payout ratio is 20%. Financial Products has continuously increased their dividend since 2011.
San-A Co Ltd (TSE:2659, Financial)
Matthews Japan purchased 249,000 shares of San-A Co, which traded for an average price of ¥4,153.5 during the quarter. The new holding accounts for 1.27% of the portfolio.
The company imports and exports passenger cars, motorcycles, trucks, construction machines, etc. The stock price has risen 68% over the past year and now trades at ¥5,060 with a P/E ratio of 23.1 and P/S ratio of 0.98.
Net income in 2014 was ¥6,750 million, up from ¥5,989 million the year before. Over the past five years, net income grew by 6%.
Looking at the balance sheet, San-A has a comfortable current ratio of 2.31, which indicates the company can cover its short-term obligations. It is also gradually paying down long-term debt.
Ryohin Keikaku Co Ltd (TSE:7453, Financial)
The fund’s third purchase during the quarter was 54,400 shares of Ryohin Keikaku for an average price of ¥14,985.17 per share.
The company operates the MUJI brand retail chain store, whose product line includes knitwear, food, and household items. Over the past year, the stock price has increased 69%, and now trades at ¥19,000, with a P/E ratio of 27.4 and P/S ratio of 2.03.
In FY 2014, EBIT per share was ¥788.63, up from ¥684.89 the year before. Over the past five years, EBIT per share has grown 12.52%.
The current dividend yield is 1%, while the payout ratio is 23%. The company’s operating margin for the trailing 12 months was 9.06%, which is higher than the retail apparel industry average of 3.9%.
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