Fund of the week: Good value in Japanese small caps
This trust's approach to investing in dynamic small-cap Japanese stocks has earnt itself an impressive rate of return.
Japan's Nikkei index has just had its best first quarter in 24 years, rising by 19.3%. "Despite the events of 2011, some areas of the Japanese economy experienced impressive rates of expansion, including e-commerce, smart phones and energy-efficient products," John MacDougall, manager of Baillie Gifford Shin Nippon Investment Trust (LSE: BGS), tells Investors Chronicle.
The Shin Nippon (literally New Japan') fund focuses on smaller firms, those with a market cap of below 150bn (£1.2bn). It has a three-year annualised share price total return of 32.53%. It looks for firms with "dynamic management" in high-growth sectors, such as healthcare and outsourcing.
MacDougall says the key is finding firms that are innovating to find new markets, disrupt existing markets and take market share, or have strengths in exporting services to other growing Asian economies. "We like firms such as Message, a private nursing home operator that benefits from the deregulation of this sector in a country where the population is ageing," MacDougall told The Times. "Another stock we like is Start Today an internet shopping site selling new and established clothing brands appealing to an increasingly internet-savvy audience."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Japan is currently a low-to-no-growth economy, so finding companies with a rising share price isn't easy. That's one reason why MacDougall likes small-cap equities, which "don't tend to be so reliant on the overall growth of an economy". The trust trades at a discount of 3.6%.
Contact: 0131-275 2000
Disclosure: MoneyWeek editor-in-chief Merryn Somerset Webb is a non-executive director of this trust.
Baillie Gifford Shin Nippontop ten holdings
Message | 4.5 |
Start Today | 4.2 |
Don Quijote | 3.6 |
Nabtesco | 3.5 |
Cocokara Fine Holdings | 2.9 |
Hamakyorex | 2.8 |
Monotaro | 2.8 |
EPS | 2.6 |
Nakanishi | 2.3 |
First Juken | 2.2 |
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
Ofgem proposes new energy tariffs with low or no standing changes
Standing charges have invited public backlash as households battle high energy bills
By Katie Williams Published
-
Google shares bounce on Gemini 2.0 launch
Google has launched the latest version of its Gemini AI platform, and markets have responded positively. Is it time to buy Google shares?
By Dan McEvoy Published