Record: Holdings have doubled in value under boss Nicholas Price
Fund manager NicholasOn his own admission, he is not always successful in his ‘pearl-fishing’ but he finds enough to keep investors sweet.
Certainly, the performance numbers on Fidelity Japan, the investment trust he manages from Tokyo, indicate that the 49-year-old has the knack.
Since he took over the helm of the trust in September 2015, when it was known as Fidelity Japanese Values, shareholders have seen their holdings rise sharply in value – by more than 100 per cent.
Although he is unwilling to state whether such attractive returns can be sustained, he believes the Japanese economy remains resilient – buoyed by a strong labour market, tourism and growing exports to China and the rest of South East Asia.
More good than bad news. The fact that the trust has borrowed money to increase its exposure to Japanese equities – a process called gearing – suggests that Price and the board believe there are more profits to be banked.
Although the economic and stock market backdrop is important to the work Price does as an investment manager, his value is more as a pearl fisher – a stock picker. It is all about trawling the stock market for companies which are chronically undervalued but have the potential to flourish, resulting – hopefully – in a subsequent sharp mark-up in their share price.
It is a job he does not do alone, drawing on research from Fidelity’s army of global and Asian analysts. But he is not frightened to put in the hard miles, visiting some 300 companies a year in the quest to discover those that will make profitable investments – while quietly dismissing those that will not.
Price describes himself as someone who at work regularly turns over stones in the hope of finding a pearl
He says: ‘There are plenty of opportunities for an investor like me in Japan. There are 4,000 listed companies and outside the biggest stocks they are often poorly covered by analysts – less well researched than equivalent companies in the UK, the United States or mainland Europe.
‘Provided you are prepared to do the hard graft, it means you can find a company where there is an anomaly between the market’s view of it – often based on ignorance – and its actual growth prospects. It is these stones we seek to turn over – companies that are reasonably valued, shareholder friendly and have three to five years of earnings growth ahead of them.’ Investment pearls.
The 99-company-strong portfolio contains a smattering of familiar names. None more so than conglomerate Yamaha which is famous for its musical instruments and motorbikes. It is a top ten holding which Price likes because of its continued success in China where demand for musical instruments is huge.
Most other positions are in companies off the radar of UK investors. They include stakes in cosmetics manufacturer Kose and confectioner Kotobuki whose products are sought after by Chinese tourists. Also SMS, a firm providing services to Japan’s burgeoning nursing care sector, fuelled by an ageing population.
Changes voted through last week mean Price will also be able to invest a maximum ten per cent in unlisted companies. Price has spent a quarter of a century living in Japan. Initially drawn to the country by his academic studies, a follow-up degree at Keio University left him fluent in Japanese and longing for a career in investment management. Fidelity duly obliged.