The Hennessy Japan Fund (Trades, Portfolio) released this week its fourth-quarter portfolio update, revealing that its top six trades included new holdings in Mitsubishi UFJ Financial Corp. (TSE:8306, Financial) and Tokyo Electron Ltd. (TSE:8035, Financial) and the closure of its holding in Nidec Corp. (TSE:6594, Financial). The fund also trimmed its positions in Keyence Corp. (TSE:6861, Financial), Kubota Corp. (TSE:6326, Financial) and Terumo Corp. (TSE:4543, Financial).
The fund seeks long-term capital appreciation by investing in Japanese securities that have good businesses and strong management teams. Emphasis is placed on key factors such as market growth potential, management quality, earnings quality and balance sheet strength.
As of January 2023, the fund’s $322 million equity portfolio contains 37 stocks, with six new positions and a quarterly turnover ratio of 9%. The top four sectors in terms of weight are industrials, consumer defensive, financial services and technology, representing 30.59%, 17.37%, 16.93% and 16.26% of the equity portfolio.
Investors should be aware portfolio updates for mutual funds do not necessarily provide a complete picture of a guru’s holdings. The data is sourced from the quarterly updates on the website of the fund(s) in question. This usually consists of long equity positions in U.S. and foreign stocks. All numbers are as of the quarter’s end only; it is possible the guru may have already made changes to the positions after the quarter ended. However, even this limited data can provide valuable information.
Mitsubishi UFJ Financial
The fund invested in 464,300 shares of Mitsubishi UFJ Financial (TSE:8306, Financial), giving the position 1.06% equity portfolio weight.
Shares of Mitsubishi UFJ Financial averaged 822.67 yen ($6.20) during the fourth quarter; the stock is modestly overvalued based on its price-to-GF Value ratio of 1.24 as of Thursday.
The Japanese bank giant has a GF Score of 65 out of 100 based on a momentum rank of 6 out of 10, a GF Value rank of 3 out of 10, a financial strength rank of 2 out of 10 and a rank of 5 out of 10 for profitability and growth.
The bank’s low financial strength is driven by several warning signs, which include equity-to-asset and debt-to-equity ratios underperforming more than 92% of global competitors. Despite this, Mitsubishi UFJ Financial has a high Piotroski F-score of 7 out of 9 and a cash-to-debt ratio that outperforms approximately 61% of global banks.
The T. Rowe Price Japan Fund (Trades, Portfolio) also has a holding in Mitsubishi UFJ Financial.
Tokyo Electron
The firm purchased 28,500 shares of Tokyo Electron (TSE:8035, Financial), giving the position 1.03% equity portfolio weight. Shares averaged 14,434.29 yen during the fourth quarter; the stock is significantly undervalued based on its price-to-GF Value ratio of 0.26 as of Thursday.
The semiconductor company's high GF Score of 99 out of 100 is driven by a rank of 10 out of 10 for profitability, growth and financial strength. The company’s GF Value ranks 8 out of 10, while its momentum ranks 7 out of 10.
Tokyo Electron’s positive investing signs include a high Altman Z-score of 5.74, no long-term debt, a four-star business predictability rank and an operating margin that has increased by approximately 5.2% per year on average over the past five years and outperforms approximately 88% of global competitors.
Nidec
The fund sold all 141,500 shares of Nidec (TSE:6594, Financial), trimming 2.63% of its equity portfolio.
Shares of Nidec averaged 7824.97 yen during the fourth quarter; the stock is significantly undervalued based on its price-to-GF Value ratio of 0.52 as of Thursday.
The brushless DC motor company has a GF Score of 72 out of 100 based on a rank of 8 out of 10 for profitability and growth, a financial strength rank of 4 out of 10 and a rank of 2 out of 10 for momentum and GF Value.
Nidec’s poor financial strength is driven on several warning signs, which include a cash-to-debt ratio that underperforms more than 79% of global competitors and a debt-to-equity ratio that underperforms approximately 65% of global industrial products companies.
Keyence
The fund sold 15,200 shares of Keyence (TSE:6861, Financial), trimming 32.14% of the position and 1.93% of its equity portfolio.
Shares of Keyence averaged 56,423.40 yen during the fourth quarter; the stock is modestly undervalued based on its price-to-GF Value ratio of 0.82 as of Thursday.
The automation sensor hardware company has a GF Score of 99 out of 100 based on a rank of 8 out of 10 for GF Value and momentum and a rank of 10 out of 10 for profitability, growth and financial strength.
Keyence’s positive investing signs include a 4.5-star business predictability rank, no long-term debt, a high Piotroski F-score of 7 out of 9 and a strong Altman Z-score of 77.
Kubota
The fund sold 338,400 shares of Kubota (TSE:6326, Financial), slicing 75.47% of the position and 1.59% of its equity portfolio.
Shares of Kubota averaged 1,957.21 yen during the fourth quarter; the stock is significantly undervalued based on its price-to-GF Value ratio of 0.70 as of Thursday.
The agriculture machinery company has a GF Score of 82 out of 100 based on a growth rank of 9 out of 10, a profitability rank of 8 out of 10, a momentum rank of 5 out of 10, a GF Value rank of 4 out of 10 and a financial strength rank of 3 out of 10.
Terumo
The fund sold 104,900 shares of Terumo (TSE:4543, Financial), trimming 24.28% of the position and 1.08% of its equity portfolio.
Shares of Terumo averaged 3,903.11 yen during the fourth quarter; the stock is significantly undervalued based on its price-to-GF Value ratio of 0.64 as of Thursday.
The medical products and equipment company has a GF Score of 84 out of 100 based on a growth rank of 10 out of 10, a profitability rank of 9 out of 10, a financial strength rank of 6 out of 10, a momentum rank of 4 out of 10 and a GF Value rank of 2 out of 10.
