A top-performing Japanese stock fund has increased its holdings in Mitsubishi Estate (MITEY, Financial), anticipating that inflation will boost the company's revenue. Orbis Investment Management's Japan Equity Strategy Fund has outperformed 98% of its peers this year. The fund's Japan head, Tsukasa Tokikuni, highlighted that the real estate owned by Mitsubishi Estate is undervalued, as their assessments haven't been updated for over two decades due to outdated accounting standards.
Japan's inflation resurgence is drawing foreign investors to its real estate market, despite concerns about global economic slowdowns due to trade tensions. Notably, Elliott Investment Management has acquired significant shares in another major developer, Sumitomo Realty & Development Co., while Prudential Financial's real estate arm invested around $900 million in Asia-Pacific real estate, primarily in Japan, during Q1.
Tokikuni mentioned that Mitsubishi Estate might face pressure from activist investors to improve its historically low valuations. Despite concerns over rising interest rates potentially increasing costs and affecting stock prices, inflation could positively impact sales and rental growth. Mitsubishi Estate's stock has dropped 10% over the past year, underperforming the TOPIX index's 5% decline. However, Orbis remains committed to holding the stock, even considering increasing their stake if prices fall further.
