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James Li
James Li
Articles (1280)  | Author's Website |

Wasatch International Growth Buys 4 Japanese Securities in 1st Quarter

Fund discloses 6 new holdings overall in latest portfolio report

The Wasatch International Growth (Trades, Portfolio) Fund disclosed this week it established six new positions during the first quarter, including four positions in Japanese securities: Systena Corp. (TSE:2317), Tsuruha Holdings Inc. (TSE:3391), Lasertec Corp. (TSE:6920) and Prestige International Inc. (TSE:4290).

According to the fund's website, Wasatch Funds is headquartered near the Wasatch Mountains close to Salt Lake City. Managers of the International Growth Fund seek long-term capital growth primarily through investing in non-U.S., small-cap securities that offer strong revenue and earnings growth, high return on capital and the ability to capitalize on favorable market trends.


The fund said in its shareholder letter that it gained 13.72% during the quarter, outperforming the MSCI All Country World ex U.S. Small Cap index’s return of 10.26%. The fund’s average annual return over the past 10 years is 15.96%, compared to the index’s return of 11.86%.

Fund increases exposure to Japanese equities

The fund’s shareholder letter said Japanese equities contributed most to the fund’s return and outperformance during the quarter. According to the letter, the challenging fourth quarter of 2018 gave the fund an “opportunity” to add high-quality companies management felt were “irrationally oversold.” The fund remains “structurally positive” on Japan’s small-cap market, one of the fund’s largest country weightings.

As of quarter-end, the fund’s $1.23 billion equity portfolio contains 88 stocks. Top sectors in terms of portfolio weight include technology, industrials and consumer staples.


The fund purchased 1,139,265 shares of Systena, giving the stake 1% equity portfolio space. Shares averaged 1,209.59 yen ($11.17) during the quarter.


The Yokohama-based company offers services for planning, designing, developing and operating online businesses for smart devices. GuruFocus ranks Systena’s profitability 8 out of 10 on several positive signs, which include a three-star business predictably rank and operating margins that have expanded approximately 9.50% per year over the past five years and are outperforming 70.85% of global competitors. Additionally, Systena’s 24.73% return on equity outperforms 86.47% of global information technology service companies.


Tsuruha Holdings

The fund purchased 142,800 shares of Tsuruha Holdings, giving the position 0.94% space in the equity portfolio. Shares averaged 9,604.53 yen during the quarter.


The Kitaku-based company manages pharmaceutical centers and drugstores in Japan, with core activities including the sale of prescription and over-the-counter drugs and medical supplies. GuruFocus ranks the company’s financial strength 8 out of 10 and profitability 7 out of 10: Even though it has a weak Piotroski F-score of 3, Tsuruha has robust interest coverage of 76.93 and a solid Altman Z-score of 5.07. Additionally, the company’s 14.53% return on invested capital exceeds its weighted average cost of capital, suggesting capital creation.



The fund purchased 81,255 shares of Lasertec, giving the holding 0.27% space in the equity portfolio. Shares averaged 3,833.64 yen during the quarter.


The Yokohama-based company develops, manufactures and sells LSI photomask / reticle inspection systems and LCD inspection and repair systems. GuruFocus ranks Lasertec’s financial strength 9 out of 10 on several positive indicators, which include no long-term debt and a strong Altman Z-score of 8.15. Additionally, profit margins and returns that are outperforming over 90% of global competitors contribute to a GuruFocus profitability rank of 8.


Prestige International

The fund purchased 36,479 shares of Prestige International, giving the position 0.04% space in the equity portfolio. Shares averaged 1,274.05 yen during the quarter.


The Tokyo-based staffing and outsourcing company provides business support services to clients. GuruFocus ranks the company’s financial strength 9 out of 10 on several positive signs, which include a strong Altman Z-score of 9.72 and debt ratios that are outperforming over 91% of global competitors. Despite this, Prestige International’s profitability ranks just 7 out of 10 as the company’s Joel Greenblatt (Trades, Portfolio) return on capital underperforms 60.93% of global competitors, offsetting strong profit margins and a three-star business predictability rank.


See also

The fund’s other buys for the quarter were Australian wealth management company Netwealth Group Ltd. (ASX:NWL) and Indian online media company Info Edge Ltd.(BOM:532777).

Disclosure: No positions.

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About the author:

James Li
I am an editorial 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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