Time to Buy Japanese Shares with T.Rowe Price Japan?

Archibald Ciganer took the helm of T. Rowe Price Japan (symbol, PRJPX) in late 2013, and things began to go south soon after. In 2014, the value of the U.S. dollar soared against the yen, sapping the returns of U.S. investors in Japanese stocks, whose yen-based profits were converted into fewer greenbacks. The average Japan stock fund surrendered 4.6% that year; T. Rowe Price Japan shed 8.5%. Since then, the fund has been stellar, besting the MSCI Japan index and its average peer fund in each of the past six calendar years, including so far in 2020.

Japanese stocks have lagged U.S. shares so far this year. Recovery will ultimately be tied to bounce-backs in the U.S. and Chinese economies, which tend to fuel growth in the Japanese stock market, Ciganer says. But Japanese firms have some of the strongest balance sheets in the world to weather the current storm, and periods of weakness in the global economy have historically been the best time to buy Japanese stocks, Ciganer says.

Ciganer relies on input from a team of nine analysts, each covering different sectors of the Japanese economy. He dedicates some 75% of the portfolio to companies he believes are poised to deliver robust growth in earnings and free cash flow (cash profits after expenses to maintain and improve the business) and stand to benefit from long-term trends. The remaining 25% of the portfolio contains companies undergoing significant changes—such as an acquisition or a shift in business strategy—that investors have yet to factor into the stock price.

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Ciganer wasn’t afraid to shake things up when the global economy plunged earlier this year. He trimmed some of his better performers and added laggards that still hold appeal over the long term, including Tokyo Disney owner and operator Oriental Lands. Despite recent park closures, Ciganer is bullish on the prospects for long-term growth in leisure travel from China and other emerging countries in Asia.

The fund also picked up FANCL, a dietary supplements and cosmetics company that should benefit from an upcoming expansion into China. Both stocks have rebounded nicely from their March lows. So far in 2020, the fund’s 4.8% return clobbers its benchmark by 10.4 percentage points.