The Schroder Japan Trust posted a 10.3% return in the six months to January 2024, while its share price discount widened to 11.1%, causing Kepler Trust Intelligence to call the trust an “appealing opportunity for investors”.
The Kepler analysis noted the differentiated approach from Schroder Japan, which it said takes a value-driven approach. The companies top holdings include Toyota, Sumitomo Mitsui Financial Group, and Hitachi, according to the AIC as of the end of March.
Fund manager Masake Taketsume added new stocks during the period, including IT service Nomura Research Institute, food packing specialist FP Corporation, and Nippon Steel.
“Masaki employs a differentiated strategy versus most peers in the AIC Japan sector, targeting high-quality, undervalued companies across the market-cap spectrum, which have attractive growth characteristics,” Kepler stated.
“This focus brings with it a strong valuation sensitivity, meaning the portfolio tends to tilt more to value, very different from the mostly growth-oriented strategies employed by its peers.”
The trust performed above its peers at 10.3%, compared to an average of 9.1% for the Topix index. Schroders Japan initiated a share buyback for 1.4 million shares at a 10.3% discount to narrow the gap, and the trust is now trading at a 9.8% discount, according to the AIC.
“We think SJG stands out in the AIC Japan sector, offering a differentiated exposure to Japanese equities through a portfolio of undervalued businesses with strong growth prospects which have the potential to improve returns over time,” Kepler stated.
“Amid the new corporate and macro-economic dynamics, which are increasingly shaping a Japanese market that remains cheap, we think Masaki’s approach to opportunities further down the market cap scale could make SJG an appealing proposition for investors looking to play Japan in a differentiated way.”
