During the first quarter, the T. Rowe Price Japan Fund (Trades, Portfolio) purchased two new stocks for its portfolio of 75 holdings, including one in the machinery sector, which is the second-most represented industry in the portfolio.
T. Rowe Price purchased 434,500 shares of Kubota Corp. (TSE:6326, Financial) for an average price of ¥1585.24 per share. Kubota produces agriculture and industrial products such as tractors, upstream and downstream water solutions and construction machinery.
The stock has declined 14% in the past year and now trades at 14x earnings. GuruFocus rates Kubota’s business predictability as 3 out of 5 stars.
EPS in the second quarter of 2015 ended Sept. 30 was ¥28.19, up from ¥26.14 in the year-ago quarter. Earnings for the full-year 2014 also saw a large increase from the prior year, reporting at ¥104.83.
The industrial company pays a dividend yield of 1.95% with a payout ratio of 25%.
The fund’s only other purchase during the period was 3,088 shares of Mori Hills REIT Investment Corp. (TSE:3234, Financial) for an average of ¥159,649 per share.
The REIT’s investment focus is on premium properties in office buildings, residential properties and retail facilities. The company aims to keep at least 80% of its portfolio in the Tokyo metropolitan area and also focuses on properties with earthquake resistance.
The stock traded down by 4% over the past year and is up 2% year to date. EPS has been following an upward trend since 2011 as shown in the graph below.
Mori Hills’ balance sheet indicates problems as current liabilities are higher than current assets. This means the company may not have the cash to cover short-term debts.
T. Rowe Price closed out five other holdings during the quarter, the largest of which was the sale of 708,800 shares of Mitsubishi UFJ Financial Group (TSE:8306, Financial). The fund sold the shares for an average price of ¥570.20 per share.
Mitsubishi UFJ Financial is one of the world’s most diversified financial groups. Over the past year, the stock has declined 39% and trades at just 5x earnings.
Diluted EPS has followed an increasing trend since 2012 and was ¥107.50 for the full year 2015. Fourth-quarter 2016 EPS was ¥33.98, a large improvement from ¥6.91 in the prior-year quarter.
Over the past five years, the fund has outperformed its benchmark, returning an average annual return of 7.85% compared to 4.88% for the TOPIX Index.
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