AVI Global has been investing in Japan for many years. Improving standards of corporate governance are making it easier to persuade companies to streamline their balance sheets. Hoarded cash is being distributed to shareholders, cross-shareholdings are being unwound and management is paying closer attention to returns on capital.
AVI’s dedicated Japanese trust (AVI Japan Opportunities) is currently the best performing of all Japanese trusts. AVI Global added to its Japanese exposure in July when that market was spooked by rising interest rates.
Within AVI Global’s portfolio, its largest Japanese holding is currently Rohto Pharmaceutical, which has only been in the portfolio for a couple of months. Rohto makes over the counter drugs and skincare products, and has a growing presence in other areas including contract manufacturing of products for third parties.
Sales and profits at Rohto are growing – this is important to AVI, which wants to avoid value traps. Questor expects AVI to outline its rationale for taking the position soon, although, often, AVI prefers to engage with portfolio companies behind closed doors.
Questor believes that AVI Global offers something genuinely different. It is remarkable that the trust has beaten the global index over the past five years without any exposure to the mega cap stocks that dominate other portfolios. One to tuck away for the long term.
Questor says: Buy
Ticker: AGT
Share price at close: 227p
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