English-style asset manager recommends “two or three investment candidates” in Japanese stocks – if capital efficiency improves

British fund manager Terry Smith said there are “two or three Japanese companies” that could be candidates for a fund he manages based on his own criteria, citing Keyence, Tokyo Electron, and Shin-Etsu Chemical. Ta. His fund does not currently invest in Japanese companies.

Smith said in an interview on Tuesday that these are “very good companies” and that while he is not currently investing in them, he may own them in the future. However, he also pointed out that many Japanese companies, including Keyence, “are not managed with a focus on returning profits,” and that “reforms are needed.”

He founded an independent management company in 2010.fundsmithHis investment philosophy is to invest in quality companies at reasonable prices and avoid frequent buying and selling.

Mr. Smith, who is sometimes referred to as Britain’s Warren Buffett, says he sees changes in Japan’s corporate governance. On the other hand, he said that there are not many companies that fall into the categories that he defines as high-quality companies, such as those with a market capitalization of $10 billion or more or a high return on capital (ROC).

Skeptical about the future of AI

On the other hand, Mr. Smith has been at the center of the artificial intelligence (AI) boom, with the stock price of Nvidia having tripled since the beginning of the year and making it the world’s largest market capitalization company. He expressed skepticism, citing a lack of a track record of profitability.

Although he acknowledged that other major index funds’ concentrated investments in Nvidia stocks and other stocks contributed to the poor returns of his fund, he said, “We don’t know what the future holds for AI.” “I don’t think there are any, because there are very few applications that people will pay for.”

He then questioned whether people were willing to pay a price large enough and high enough to justify this investment, and if not, Nvidia was “going to have problems.” said.

Mr. Smith’s Fundsmith Equity Fund has returned 9% in dollar terms since the beginning of the year, but has lagged the MSCI World Index by nearly 20%.

His fund’s main holdings include Microsoft, Novo Nordisk, L’Oreal, and Stryker. Nvidia is not among the Fundsmith Equity fund’s 29 holdings, according to Bloomberg data.

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