The Hennessy Japan Small Cap Fund (Trades, Portfolio) released its fourth-quarter portfolio this week, disclosing it established 11 new positions.
Managed by Tadahiro Fujimura and Tetsuya Hirano, the fund invests in smaller Japanese companies to achieve long-term capital appreciation. GuruFocus data shows the fund posted an 8.52% return in 2016, underperforming the S&P 500’s return of 11.96%. The current portfolio is largely composed of securities in the industrials sector.
The fund’s top five largest new buys for the quarter were DCM Holdings Co. Ltd. (TSE:3050, Financial), SBS Holdings Inc. (TSE:2384, Financial), Bunka Shutter Co. Ltd. (TSE:5930, Financial), Hiramatsu Inc. (TSE:2764, Financial) and Takuma Co. Ltd. (TSE:6013, Financial).
DCM Holdings
In its largest transaction of the quarter, the fund purchased 192,500 shares of DCM Holdings for an average price of 998.88 yen ($8.82) per share, giving it 1.98% portfolio space. It previously exited a position in the stock in the second quarter of 2017.
The home center stores operator has a market cap of 12.1 billion yen; its shares were trading around 1,059 yen on Friday with a price-earnings (P/E) ratio of 39.96.
The Peter Lynch chart below shows the stock is trading about evenly with its fair value.
GuruFocus ranked DCM’s financial strength 6 of 10 and its profitability and growth 4 of 10. The company’s trailing dividend yield is 2.37% and its forward dividend yield is 2.46%. The dividend payout ratio is 33%.
The fund is the only guru invested in DCM, holding 0.14% of outstanding shares.
SBS Holdings
Having previously closed a position in SBS Holdings in the fourth quarter of 2014, the fund invested in 206,400 shares for an average price of 834.92 yen per share, expanding the portfolio 1.82%.
The logistics services company has a market cap of 47.78 billion yen; its shares were trading around 1,203 yen on Friday with a P/E ratio of 13.78.
According to the Peter Lynch chart below, the stock is trading evenly with its fair value.
GuruFocus ranked SBS’ financial strength 5 of 10 and its profitability and growth 6 of 10. The company’s trailing dividend yield is 3.01% and its forward dividend yield is 3.1%. The payout ratio is 19%.
The fund holds 0.52% of SBS’ outstanding shares.
Bunka Shutter
The fund bought 169,500 shares of Bunka Shutter for an average price of 874.03 yen per share, impacting the portfolio by 1.62%.
The manufacturer of building materials has a market cap of 78.04 billion yen; its shares were trading around 1,081 yen on Friday with a P/E ratio of 18.88.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading above its fair value.
GuruFocus ranked Bunka Shutter’s financial strength 7 of 10 and its profitability and growth 5 of 10. The company’s trailing dividend yield and forward dividend yield are both 1.83%. The payout ratio is 35%.
The fund holds 0.24% of the company’s outstanding shares.
Hiramatsu
The fund managers invested in 255,100 shares of Hiramatsu for an average price of 616.44 yen per share. The trade had an impact of 1.57% on the portfolio.
The restaurant operator has a market cap of 28 billion yen; its shares were trading around 576 yen on Friday with a P/E ratio of 15.04.
According to the Peter Lynch chart below, the stock is fairly priced as it is trading about evenly with its fair value.
GuruFocus ranked Hiramatsu’s financial strength 6 of 10 and its profitability and growth 6 of 10. The company’s trailing dividend yield is 2.82% and its forward dividend yield is 2.80%. The payout ratio is 43%.
The fund holds 0.73% of Hiramatsu’s outstanding shares.
Takuma
The fund bought 113,400 shares of Takuma for an average price of 1,300 yen per share, giving it 1.56% portfolio space.
The company, which develops water and waste treatment technologies, has a market cap of 133.13 billion yen; its shares were trading around 1,604 yen on Friday with a P/E ratio of 14.99.
According to the Peter Lynch chart below, the stock is fairly priced as it appears to be trading about evenly with its fair value.
GuruFocus ranked Takuma’s financial strength 7 of 10 and its profitability and growth 7 of 10. The company’s trailing dividend yield and forward dividend yield are both 0.88%. The payout ratio is 13%.
The fund holds 0.14% of the company’s outstanding shares.
Other positions established during the quarter include Toyo Electric Manufacturing Co. Ltd. (TSE:6505), Riken Technos Corp. (TSE:4220), Sun Corp. (TSE:6736), Pacific Industrial Co. Ltd. (TSE:7250), UMC Electronics Co. Ltd. (TSE:6615) and Kakaku.com Inc. (TSE:2371).
Disclosure: I do not own any stocks mentioned.
