Page 13 - DIY Investor Magazine | Issue 36

‘ E-COMMERCE REMAINS A FAVOURED THEME FOR JFJ’S MANAGERS DUE TO THE SECTOR’S HUGE GROWTH POTENTIAL’
All these businesses look especially attractive now, as their strong market positions mean they possess the pricing power to pass on rising input costs to end consumers. In addition to these new acquisitions, e-commerce remains a favoured theme for JFJ’s managers due to the sector’s huge growth potential. Only 11% of Japanese retail sales are conducted on-line - a much lower percentage than in other industrialised countries.
The managers have taken advantage of the recent market sell-off to invest in the likes of GMO Payment Gateway, Japan’s number one online payments processor, and MonotaRO, the country’s top business to business e-commerce company, providing safety equipment and clothing, tools and other business supplies, which are well-positioned to benefit.
GMO Payment Gateway’s operating profits have been growing by more than 20% a year, while MonotaRO’s sales have been consistently growing by close to 20% a year. JFJ’s managers have also maintained their long-standing conviction in the favourable long-term prospects for robotics.
Levels of industrial automation are still relatively lower in most places, but recent supply chain insecurities and rising wage costs are likely to accelerate this trend as companies seek to onshore production and automate processes to minimise labour costs. The portfolio includes several of the world’s leading factory automation companies including Keyence, SMC and MISUMI. JFJ’s managers remain equally confident in the growth potential of the computer gaming sector.
This sector is becoming more profitable due to gamers’ increasing willingness to pay to download games and purchase related content. Top 10 portfolio holding Nintendo is a major beneficiary of this trend.
Recent acquisitions have been funded by the sale of positions in some internet and software companies where the managers’ conviction has waned due to the companies’ failure to realise their growth potential, or where competition has increased.
For example, they have sold their holding in digital signature company Bengo4.com, which is experiencing very intense competition.
They have also sold Rakuten, a large e-commerce company whose unsuccessful foray into mobile phone sales is generating large losses.
LONG TERM QUALITY AND GROWTH FOCUS OVERCOMES NEAR TERM CHALLENGES.
13
Dec 2022
DIY Investor Magazine ·
Despite the current pervasive uncertainties and market volatility, JFJ’s managers believe the long-term outlook for Japan’s most innovative, high quality, high growth companies remains very positive.
And they remain confident that whatever the near-term challenges, the quality and growth focus of their investment approach is the best way to ensure the Trust maintains its
long track record of generating significant outright gains and outperformance for its shareholders. This is especially the case at present, when market conditions have provided many opportunities to acquire high quality, high growth businesses at especially attractive prices.
More information on JFJ here >
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