13 Aug

Stock-Level Analysis of Japan-Focused Mutual Funds: FPJAX

WRITTEN BY David Ashworth FEATURED IN Macroeconomic Analysis

Fidelity Advisor Japan Fund

In the previous article, we looked at the stock-level performance of the T. Rowe Price Japan Fund (PRJPX). In this article, we’ll look at the second of our Japan-focused mutual funds chosen for this review: the Fidelity Advisor Japan Fund’s (FPJAX) stock-level performance.

FPJAX’s total returns for the past year ended July 24, 2015, stood at 2.5%—the lowest among the four funds chosen for this analysis. In this article, we’ll explore the reasons for this sub-par performance by the fund.

Stock-Level Analysis of Japan-Focused Mutual Funds: FPJAX

For the period mentioned above, the FPJAX’s top holding has been Astellas Pharma (ALPMY), forming 5.3% of the portfolio on an average. East Japan Railway Company (EJPRY) and Mitsubishi UFJ Financial Group (MTU) make up the fund’s top three holdings with an average exposure of 4.3% and 3.9%, respectively, in the period.

It is interesting to note that all these holdings have been among top ten contributors to total return, with MTU being the second highest contributor. The fund’s top picks in the financials, healthcare, industrials, and telecom services were all respective top contributors to the fund’s overall return. What can explain the fund’s poor overall showing? Let’s explore this further.

Reasons for the poor showing

The fund’s poor showing is partly due to picks that have gone wrong. Its top picks in the consumer staples, energy, information technology, and materials sectors have been among the highest negative contributors to overall return. These picks formed an average 8.5% of the fund’s portfolio in the one-year period ended July 24. The manager picks in the consumer staples, information technology, and materials sectors did not turn out to be top contributors to returns.

The fund’s low exposure to the industrials sector, along with stock calls that went wrong, is another reason for the fund’s poor showing. The fund manager’s belief in materials and utilities stocks also did not pay off. A higher exposure to stocks like Sony Corp (SNE) and Nidec Corporation (NJ) and lower exposure to stocks like SoftBank (SFTBY), Hitachi, and Honda Motor (HMC) would have also helped.

In the next two articles, let’s look at the top impacting stocks of the remaining two funds.

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