The $2.87 billion Matthews Japan Fund (Trades, Portfolio) welcomed six stocks to its portfolio in the fourth quarter, it reported this week.
The fund is coming off a challenging year in which it declined 20.18%, while its benchmark MSCI Japan Index slumped 12.58%. Since its 1998 inception, it has maintained a lead over its benchmark, returning 5.31% annualized versus a 3.05% return in the index.
Fund managers attributed the performance to “poor stock selection” in industrial and consumer staple sectors, a weak consumer discretionary sector and lackluster small and mid-cap returns relative to large caps. Despite positioning in “quality growth-oriented” companies, the market sold off “indiscriminate of quality or growth” in the fourth quarter as investors feared a recession, the fund’s managers, Taizo Ishida and Shuntaro Takeuchi, said in a shareholder letter.
“As a result of the large correction in the recent quarter, however, valuations have already come down quite significantly. The MSCI Japan Index's price-to-book ratio has declined to 1.1X — nearing the trough level in the era of Prime Minister Shinzo Abe. A handful of stocks that we've been monitoring closely are approaching the levels at which we would feel comfortable investing in over the mid to long term,” they wrote.
The portfolio’s makeup consists of a 21.49% weighting in technology stocks and 17.01% weighting in industrials, its two largest sectors represented. Its holdings, totaling 54 stocks, were valued at $2.84 billion by the end of the quarter.
The six positions Matthews Japan Fund (Trades, Portfolio) portfolio managers started during the fourth quarter were: Nippon Telegraph & Telephone Corp. (TSE:9432, Financial), Sony Corp. (TSE:6758, Financial), Paltac Corp. (TSE:8283, Financial), Net One Systems Co. Ltd. (TSE:7518, Financial), Mitsubishi Corp. (TSE:8058, Financial) and Nakanishi Inc. (TSE:7716).
Nippon Telegraph & Telephone Corp. (TSE:9432, Financial)
Matthews Japan Fund (Trades, Portfolio) purchased 2,415,000 shares of the company, giving it 3.47% portfolio space. The stock’s fourth-quarter share price averaged 4,678 yen.
Nippon Telegraph & Telephone Corp. has a market cap of 8972.06 billion yen; its shares were traded around 4,691.00 yen with a price-earnings ratio of 9.75 and price-sales ratio of 0.78. The trailing 12-month dividend yield of Nippon Telegraph & Telephone Corp. stocks is 3.43%. The forward dividend yield of Nippon Telegraph & Telephone Corp. stocks is 3.64%. Nippon Telegraph & Telephone Corp. had an annual average earnings growth of 2.60% over the past 10 years. GuruFocus rated Nippon Telegraph & Telephone Corp. the business predictability rank of 3-star.
Sony Corp. (TSE:6758, Financial)
The fund purchased 1,284,900 shares of Sony Corp., giving it 2.18% of the portfolio. The stock’s fourth-quarter share price averaged 5,959 yen.
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Sony Corp. has a market cap of 6937.12 billion yen; its shares were traded around 5,499.00 yen with a price-earnings ratio of 10.44 and price-sales ratio of 0.82. The trailing 12-month dividend yield of Sony Corp. stocks is 0.55%. The forward dividend yield of Sony Corp. stocks is 0.55%. Sony Corp. had an annual average earnings growth of 0.20% over the past 10 years.
Paltac Corp. (TSE:8283, Financial)
The fund purchased 1,068,200 shares of Paltac Corp., giving it 1.77% of the portfolio. The stock's fourth-quarter share price averaged 5541 yen.Ă‚
Paltac Corp. has a market cap of $331.72 billion; its shares were traded around 5,220.00 yen with a price-earnings ratio of 18.08 and price-sales ratio of 0.32. The trailing 12-month dividend yield of Paltac Corp. stocks is 1.28%. The forward dividend yield of Paltac Corp. stocks is 1.30%. Paltac Corp. had an annual average earnings growth of 7.70% over the past five years.
Net One Systems Co. Ltd. (TSE:7518, Financial)
The fund purchased 2,818,100 shares of Net One Systems Co. Ltd., giving it 1.75% of the portfolio. The stock's fourth-quarter share price averaged 2,263 yen.Ă‚
Net One Systems Co. Ltd. has a market cap of 191.57 billion yen; its shares were traded around 2,362.00 yen with a price-earnings ratio of 25.89 and price-sales ratio of 1.17. The trailing 12-month dividend yield of Net One Systems Co. Ltd. stocks is 1.33%. The forward dividend yield of Net One Systems Co. Ltd. stocks is 1.33%. Net One Systems Co. Ltd. had an annual average earnings growth of 4.30% over the past five years.
Mitsubishi Corp. (TSE:8058, Financial)
The fund purchased 1,693,400 shares of Mitsubishi Corp. giving it 1.63% of the portfolio. The stock's fourth-quarter share price averaged 3,178 yen.Ă‚
Mitsubishi Corp. has a market cap of 5,044.84 billion yen; its shares were traded around 3,111.00 yen with a price-earnings ratio of 8.22 and price-sales ratio of 0.43. The trailing 12-month dividend yield of Mitsubishi Corp. is 3.93%. The forward dividend yield of Mitsubishi Corp. is 3.96%. Mitsubishi Corp. had an annual average earnings growth of 2.0% over the past 10 years.
Nakanishi Inc. (TSE:7716)
The fund purchased Nakanishi Inc., giving it 1.37% portfolio weight. The stock’s fourth-quarter share price averaged 2,246 yen.
Nakanishi Inc. has a market cap of 162.17 billion yen; its shares were traded around 1,864.00 yen with a price-earnings ratio of 19.66 and price-sales ratio of 4.44. The trailing 12-month dividend yield of Nakanishi Inc. is 1.39%. The forward dividend yield of Nakanishi Inc. is 1.39%. Nakanishi Inc. had an annual average earnings growth of 5.50% over the past 10 years. GuruFocus rated Nakanishi Inc. the business predictability rank of 3.5-star.
See Matthews Japan Fund (Trades, Portfolio)’s portfolio here.
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