Hennessy Japan Fund (Trades, Portfolio) has unveiled its portfolio for the third quarter of fiscal 2021, which ended on July 31. The main transactions include a new takeover in Hitachi Ltd. (EST: 6501, financial) and reductions in the Shimano Inc. fund (EST: 7309, Financial), Nidec Corp (EST: 6594, financial), Daikin Industries Ltd. (IS: 6367, Financial) and Terumo Corp. (EST: 4543, financial).
Managed by Masakazu Takeda and Yu Shimizu, the fund, part of California-based Hennessy Advisors, invests in a concentrated number of high-quality Japanese companies. Portfolio managers look for value opportunities among companies that have good management, strong cash flow generation, and above average earnings growth.
At the end of the quarter, the portfolio contained 28 stocks with a new position established in Hitachi. It was valued at $ 784 million and experienced a 5% turnover rate. Major holdings include Sony Group Corp. (IS: 6758, Financial), Keyence Corp. (IS: 6861, Financial), Recruit Holdings Co. Ltd. (IS: 6098, financial), Nidec and Daikin Industries.
The three main sectors represented are industry (33.82%), cyclical consumption (20.39%) and health (12.55%).
The fund took a new position in Hitachi (EST: 6501, financial) during the quarter with the purchase of 659,100 shares. The shares traded at an average price of 6,032.98 yen ($ 54.09) per share during the quarter. Overall, the purchase had a 4.84% impact on the portfolio and GuruFocus estimates the total gain from the stake at 9.51%.
Hitachi provides IT services in a wide variety of business areas, including financial services. The company’s main products and services include systems integration, consulting, cloud services, servers, storage, software, telecommunications, and networking and ATMs.
On September 30, the stock was trading at 6,607 yen per share with a market cap of 6.29 trillion yen. According to the GF Value Line, the stock is trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rating of 6 out of 10 and a valuation rating of 2 out of 10. There is currently a serious warning sign indicating declining earnings per share . As per the warning sign, the company has seen its revenue decline over the past three years, but its net profit peaked in 10 years in March.
Faced with rising stock prices, the fund withdrew its Shimano (EST: 7309, Financial situation. Fund managers sold 44,300 shares to reduce the position by 23.32%. The shares traded at an average price of 25,843.30 per share during the quarter. GuruFocus estimates the total gain of the position at 85.70%, and the sale had an impact of -1.19% on the entire portfolio.
Shimano develops, manufactures and distributes bicycle components, fishing tackle and rowing equipment. The company also develops and distributes lifestyle equipment products, such as clothing, shoes, bags and related items. About 80% of company-wide sales come from its bicycle components segment. Shimano is present in Japan, Asia, Europe, North America, Latin America and Oceania. The company was founded in 1921 and is headquartered in Osaka, Japan.
As of September 30, the stock was trading at 32,570 yen per share with a market cap of 3.02 trillion yen. The stock is significantly overvalued according to the GF value line.
GuruFocus gives the company a financial strength rating of 10 out of 10, a profitability rating of 7 out of 10 and a review rating of 2 out of 10. There are currently no serious warning signs for the company. business. The company’s debt to equity ratio of 24,532.43 ranks it better than the industry’s 99.88%, as cash levels have steadily increased over the past decade.
The fund has also withdrawn its historical Nidec (EST: 6594, financial) held during the quarter. The sale of 72,300 shares reduced the holding by 16.24%. During the quarter, the shares traded at an average price of 12,589.60. The sale had an impact of -0.98% on the portfolio and GuruFocus estimates the total gain of the stake at 97.83%.
Nidec is a world leader in brushless DC motors. Nidec holds the number one market share in a wide variety of products, such as hard disk motors, optical disk drive motors, vibration motors on handsets, brushless motors for inverter air conditioners and brushless motors for electric power steering on automobiles. It continues to benefit from the growing demand for energy efficient engines, stimulated by the strengthening of environmental regulations.
The stock was trading at 12,515 yen per share with a market cap of 7.33 trillion yen on September 30. The GF value line gives the stock a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rating of 8 out of 10, and a valuation rating of 1 out of 10. There is currently a serious warning sign that assets are growing more. quickly as income. The company’s strong profitability is supported by operating and net margins above historical averages.
Daikin Industries was reduced by 17.04% with the sale of 39,900 shares of the fund’s stake. The shares traded at an average price of 21,445.30 during the quarter, giving the company an estimated total gain of 93.56%. Overall, the sale had an impact of -0.94% on the portfolio.
Daikin Industries is one of the largest heating, ventilation and air conditioning, or HVAC, companies in the world. North America, Japan, China and Europe are Daikin’s four largest markets, accounting for 24.1%, 23.7%, 16.7% and 14.5% of revenue, respectively. in fiscal 2018. Air conditioning accounted for approximately 90% of sales and operating income, while chemicals and others accounted for the remainder.
On September 30, the stock was trading at 24,360 yen per share with a market cap of 7.13 trillion yen. According to the GF Value Line, the stock is trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rating of 7 out of 10, and a review rating of 1 out of 10. There is a serious warning sign for declining margin operating. The Company’s operating and free cash flow has increased steadily over the past few years and is more than sufficient to support dividend payments.
To complete the five main businesses of the company, the first reduction of its Terumo (EST: 4543, financial) this year. The managers reduced their stake by 13.45% with the sale of 154,900 shares. The shares traded at an average price of 4,275.60 per share during the quarter. Overall the sale had an impact of -0.69% on the portfolio and GuruFocus estimates the total gain of the position at 92.21%.
Terumo manufactures and sells medical products and equipment. The company has three main activities: blood management, cardiac and vascular hospital and general hospital. The cardiac and vascular business generates the largest portion of revenue and sells interventional cardiac and endovascular therapies, cardiovascular surgery systems, neurovascular products and vascular transplant products. The business of general hospitals includes diabetes management, consumer healthcare, drug and device technologies, and general hospital products. The blood management business sells blood components, therapeutic apheresis and cellular technologies. Terumo generates the majority of its sales in Asia, with Japan accounting for the largest share of Asian sales.
As of September 30, the stock was trading at 5,265 yen per share with a market cap of 3.98 trillion yen. The stock is trading at a slightly overvalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rating of 8 out of 10 and a valuation rating of 2 out of 10. There is currently a serious warning sign that assets are growing more. quickly as income. The company’s return on investment easily supported the weighted average cost of capital, indicating high capital efficiency.