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James Li
James Li
Articles (760)  | Author's Website |

T. Rowe Price Japan Fund’s Top 5 Buys in 1st Quarter

Fund adds one new holding, boosts four others

The T. Rowe Price Japan Fund (Trades, Portfolio), part of T. Rowe Price Group Inc. (NASDAQ:TROW), disclosed this week its top five buys for the first quarter included a new holding in Coca-Cola Bottlers Japan Holdings Inc. (TSE:2579) and position boosts in Takeda Pharmaceutical Co. Ltd. (NYSE:TAK)(TSE:4502), FamilyMart UNY Holdings Co. Ltd. (TSE:8028), Zozo Inc. (TSE:3092) and Benefit One Inc. (TSE:2412).

Managed by Archibald Ciganer, the Japan Fund seeks long-term capital appreciation primarily through investments in equity securities of Japanese companies with one or more of the following characteristics: strong market position, stable earnings and cash flows and sound balance sheets. Additionally, the fund seeks companies that are trading at reasonable prices in relation to earnings or book value.

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As of quarter-end, the $763 million equity portfolio contained 77 stocks, including one new position. The top three sectors in terms of portfolio weight are industrials, consumer cyclical and technology.

New buy: Coca-Cola Bottlers Japan

The fund invested in 298,800 shares of Coca-Cola Bottlers Japan, giving the position 1% weight in the equity portfolio. The stock traded for an average price of 3,068.5 yen ($27.42) per share during the quarter. 

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The Japanese soft drinks manufacturer, which operates through licensing agreements with major Warren Buffett (Trades, Portfolio) holding The Coca-Cola Co. (NYSE:KO), manufactures various non-alcoholic beverages through its Cold Beverage business segment. GuruFocus ranks the company’s financial strength 7 out of 10: Even though the company has a weak Piotroski F-score of 3 and a modest Altman Z-score of 2.82, Coca-Cola Bottlers Japan’s interest coverage of 19.71 is significantly higher than Benjamin Graham’s required threshold of 5 and outperforms 66% of global competitors.

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GuruFocus lists three positive signs for Coca-Cola Bottlers Japan, including a dividend yield near a three-year high and a price-book ratio near a three-year low.

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Takeda

The fund added 353,200 shares of Takeda, increasing the equity portfolio 1.90%. The stock traded for an average price of 4,436.08 yen per share during the quarter. 

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Takeda focuses on several therapeutic areas, including oncology, gastroenterology, vaccines and neurology. GuruFocus ranks the company’s profitability 6 out of 10 primarily due to profit margins and returns outperforming over 60% of global competitors.

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Other gurus with holdings in Takeda include the Vanguard Health Care Fund (Trades, Portfolio) and the Causeway International Value (Trades, Portfolio) Fund.

FamilyMart

The fund added 167,400 shares of FamilyMart, increasing the equity portfolio 0.56%. The stock traded for an average price of 3,160.70 yen per share during the quarter. 

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The Japanese convenience store chain operates approximately 18,000 locations under a franchise business model. GuruFocus ranks FamilyMart’s profitability 8 out of 10 on several positive investing signs, which include a three-year revenue growth rate that outperforms 95% of global competitors, albeit decelerating slightly over the past 12 months. Despite this, operating margins have declined over the past five years and are underperforming 61% of global competitors.

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Zozo

The fund invested in 214,800 shares of Zozo, increasing the equity portfolio 0.53%. During the quarter, the stock traded for an average price of 2,050.91 yen per share.

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GuruFocus ranks Zozo’s profitability 8 out of 10: Even though the company’s three-year Ebitda growth rate outperforms just 56% of global competitors, its operating margin has increased approximately 4.80% per year over the past five years and is outperforming 98% of global specialty retail companies. Additionally, the company’s business predictability ranks five stars on strong and consistent revenue growth over the past 10 years.

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Benefit One

The fund invested in 169,500 shares of Benefit One, increasing the equity portfolio 0.44%. During the quarter, the stock traded for an average price of 1,917.73 yen per share.

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Benefit One provides lodging facilities, schools and sports clubs to support welfare work and sales. GuruFocus ranks the company’s financial strength and profitability 8 out of 10 on several positive signs, which include robust interest coverage, expanding profit margins and a dividend yield near a three-year high. Additionally, Benefit One’s business predictability ranks four stars out of five on consistent revenue and earnings growth over the past 10 years.

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Disclosure: No positions.

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About the author:

James Li
I am an editorial assistant and 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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