Masakazu Takeda and Yu Shimizu, portfolio managers of the Hennessy Japan Fund (Trades, Portfolio), disclosed Monday they initiated a position in Mitsubishi UFJ Financial Group Inc. (MTU, Financial)(TSE:8306, Financial) and added to their positions in five other companies: Japan Tobacco Inc. (TSE:2914, Financial), SoftBank Group Corp. (TSE:9984, Financial), Shimano Inc. (TSE:7309, Financial), Toyota Motor Corp. (TM, Financial)(TSE:7203) and Daikin Industries Ltd. (TSE:6367).
Mitsubishi
Takeda and Shimizu invested in 2,167,500 shares of Mitsubishi for an average price of 811.78 yen ($7.67) per share. With this transaction, the fund managers increased their portfolio 4.47%.
Mitsubishi provides commercial and trust banking services in over 40 countries. The Tokyo-based bank has modest profitability: although the company’s profit margins are slightly above average, the company’s margins and returns underperform over 89% of global competitors.
Japan Tobacco
The fund managers added 243,200 shares of Japan Tobacco for an average price of 3,697.20 yen per share. With this transaction, Takeda and Shimizu increased the portfolio 2.2%.
While Japan Tobacco also operates in the food-processing and pharmaceutical businesses, tobacco products account for approximately 90% of revenues. The company’s profitability ranks 7 out of 10 as the company’s operating margin is near a 10-year high of 27.68% and outperforms 66% of global competitors. Additionally, profit margins have increased approximately 2.8% per year over the past five years.
Japan Tobacco has five positive investing signs, including a dividend yield near a 10-year high and a price-sales ratio near a three-year low.
SoftBank
Takeda and Shimizu added 95,100 shares of SoftBank for an average price of 9,367.80 yen per share. With this transaction, the fund managers increased their portfolio 2.15%.
SoftBank, a telecommunications and e-commerce conglomerate, has a 28% stake in Alibaba Group Holding Ltd. (BABA, Financial) and an 85% stake in Sprint Corp. (S, Financial). The company’s profitability ranks 8 out of 10: even though its three-star predictability rank is on watch, SoftBank’s net margin and return on equity outperform 87% and 94% of global telecom services companies.
Shimano
Takeda and Shimizu added 43,000 shares of Shimano for an average price of 15,634.40 yen per share. With this transaction, the fund managers increased their portfolio 1.68%.
GuruFocus ranks Shimano’s financial strength 9 out of 10 as the company has robust interest coverage and Altman Z-scores. The bicycle component manufacturer’s equity-to-asset ratio of 0.88 outperforms over 94% companies.
Toyota
Takeda and Shimizu added 82,100 shares of Toyota for an average price of 7,264 yen per share. With this transaction, the fund managers increased their portfolio 1.54%.
Toyota reported 21.79 trillion yen in net revenues for the nine months ending Dec. 31, up 8.1% from the prior-year period. Even though the company’s three-year revenue growth rate outperforms just 53% of global competitors, Toyota’s profitability ranks a strong 9 out of 10 due to strong net margins and returns. The company’s net margin is near a 10-year high of 8.25%, which outperforms 77% of global auto manufacturers. Additionally, Toyota has an excellent Piotroski F-score of 8, suggesting strong business operations.
Daikin
Takeda and Shimizu added 158,200 shares of Daikin for an average price of 13,303.80 yen per share. With this transaction, the fund managers increased their portfolio 1.40%.
Daikin, a major heating, ventilating and air conditioning company, has four positive investing signs, including expanding operating margins and a strong Piotroski F-score of 7. GuruFocus ranks Daikin’s profitability 8 out of 10 as the company’s profit margins are near a 10-year high and outperform approximately 70% of global competitors.
Disclosure: No positions.
