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Ecclesiastical Amity International
by Matthew Goodburn on Jun 25, 2013 at 00:01
Japan still best value
Selection star pick Hepworth is unconcerned by the recent volatility in Japanese equities, arguing that the weaker currency, cheap valuations and economic reforms should sustain the market for a number of years.
Hepworth did not invest in the country until 2010, when valuations of many of its companies became too cheap for him to ignore and he took the weighting to around 10% of the £235 million fund before reducing it slightly more recently.
Other than buying large caps such as bank Sumitomo Mitsui and tech giant Sony, Hepworth has preferred to access Japan through buying into a number of Japanese investment trusts that were trading on significant discounts until recently.
He bought into Schroder Japan Growth, JPM Japanese, Baillie Gifford Japan and Fidelity Japanese Values when all were trading within the range of 10-20% discounts, but after the last few months of strong performance, discounts have narrowed.
Hepworth sold out of Baillie Gifford Japan in April when it had moved to a 5% premium and has seen Sumitomo Mitsui and Sony gain over 100% since he added them to the fund.
He says: ‘Over a three to five-year horizon there is a huge amount of value still in Japan. [Corporate] profit margins remain low and on a 20-year adjusted view we could see further weakening in the yen to boost profits back towards their long term average.
‘Japan remains the cheapest developed market, trading at around one times book.’
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