JPM’s Weindling takes advantage of Japanese coverage gap

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JP Morgan’s Nicholas Weindling says with so little of the Japanese equity market covered by analysts, having a team on the ground in Japan allows him to tap into “hidden stories that are being missed by the market”.

The manager of the £376.7m JP Morgan Japanese trust and co-manager of the £78.4m JP Morgan Japan Smaller Companies trust explains that around half of the equity market in Japan is covered by only one or no analysts at all.

The entire team for both trusts is based out of Tokyo, something which Weindling says may be uncommon but is in fact crucial to identifying stock-specific ideas in the market.

He says: “Very few fund management companies are based in Tokyo. Having our team in Tokyo really helps our process because we are very bottom-up, very fundamental. Everything is based around our company meetings. Our team had 2,400 meetings with companies last year.

“There is a general information and coverage gap in Japan. There is very little coverage if you compare it to other markets. We are able to find hidden stories that are being the missed by the market.”

Japanese company Shimano is the global number one for producing high end gears for bikes, according to Weindling. However despite its good fundamentals, Weindling argues that the stock is often missed by the market.

He says: “Shimano is a big company about $9bn, yet there are only three analysts looking at it.

“This shows the big gap here, that this total world dominant company with a very simple story has almost nobody looking at it.”

Further down the market cap scale and the lack of coverage gets “even more extreme”, argues Weindling, yet this is where he highlights some of the most interesting opportunites.

Weindling gives the example of online B2B e-commerce company, MonotaRO, again with strong fundamentals and the potential for growth. He says: “Its sales are growing very steadily at around 20 to 25 per cent per year.

“It is also expanding into the US and Korea. MonotaRO has a very strong management team, yet no analyst coverage at all. This is the kind of stock that we see as very exciting.”

JP Morgan Japanese’s cumulative performance to 25 July 2013

 
JP Morgan Japanese 3.09% 38.19% 56.47% 60.74% 58.71%
2.84% 39.80% 65.02% 77.35% 88.19%
0.24% -1.16% -5.18% -9.37% -15.67%
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Source: FE Analytics