Man GLG Japan CoreAlpha - selling winners, buying losers
Dominic Rowles | Mon 08 July 2019
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- Stephen Harker invests in unloved companies with turnaround potential
- He thinks many Japanese banks and car makers are particularly good value
- Performance has struggled in recent years but we continue to rate the manager highly
Buy low, sell high. It's what every investor wants to achieve when investing in the stock market. But there's more than one way to go about it.
Stephen Harker, manager of the Man GLG Japan CoreAlpha Fund is a contrarian. He invests in unloved companies when he thinks their share prices are at a low point. He gradually takes profits as the share price recovers, before finally selling the investment and moving on to the next opportunity.
He's shown this to be a successful way of investing over the long run. But it can take time for other investors to recognise a company's prospects so shorter-term periods of poor performance should be expected and a long-term outlook is essential.
The manager tends to invest in relatively few companies. This means each one can contribute strongly to returns, although it's a higher risk approach as the portfolio is less diversified.
Stephen Harker is a passionate fund manager with an established investment process and the support of an experienced, stable team. We think this fund is a great option for investing in Japan and it remains on the Wealth 50 list of our favourite funds.
How's the fund performed?
The manager's contrarian investment style has been out of favour in recent years. Investors have generally preferred to invest in companies that produce products and services people will pay for regardless of what happens in the economy, with the potential to grow earnings year after year. Harker doesn’t think these companies have much potential for further growth though, so he's not tempted to change the way the fund's invested.
Performance was weaker over the past year too. One of the fund's worst performers was financial services company Nomura Holdings. Its share price performed poorly when it was held responsible for leaking sensitive information. The company also released a disappointing set of financial results, announcing its first loss for a decade.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| June 14 -
June 15 |
June 15 -
June 16 |
June 16 -
June 17 |
June 17 -
June 18 |
June 18 -
June 19 | |
| Man GLG Japan CoreAlpha | 21.0% | -5.7% | 42.1% | 4.9% | -2.3% |
| FTSE Japan | 19.0% | 7.7% | 24.0% | 9.3% | -1.2% |
Past performance is not a guide to the future.. Source: *Lipper IM to 30/06/2019
Harker's long-term track record remains exceptional. Our analysis puts this down to his ability to invest in outstanding companies, regardless of their size or what sector they're in. Since he took control of the fund in January 2006, he's turned an investment of £10,000 into £25,021*. The broader Japanese stock market would've returned £18,216 in that time. Past performance isn’t a guide to the future.
Where's the manager found opportunities?
Harker tends to focus his search on the larger end of the Japanese stock market and he thinks the large, high-quality companies he looks for have rarely been so lowly valued.
The fund's invested across most major Japanese industries but there's a focus on banks and car makers where the manager thinks there are lots of unloved companies with plenty of growth potential.
Company in focus: Toyota
Car maker Toyota is one of the fund's biggest investments. Its share price has been volatile in recent years. Investors worried the company would be left behind as the industry moves towards electric and autonomous cars.
Harker doesn’t share those concerns though. Toyota has been a pioneer in the hybrid car space since the launch of the Toyota Prius in 1997. Its cars have a great environmental record with CO2 emissions well below target levels. It could also benefit from a new trade deal with the European Union which will eventually see tariffs on Japanese car imports reduced to zero.
The company's share price has done well in recent months and, in line with his investment process, the manager took some profits on his investment.
Recent investments include Seven & I, owner of a number of well-known retailers, including 7-Eleven. Its share price performed poorly in recent months but it's a company Harker knows well, having owned its shares on three separate occasions. He thinks the company is much higher quality than both of its main competitors and has the potential to perform well in the future.