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How the Fidelity Japan Fund Performed in September 2015

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Performance evaluation

The Fidelity Japan Fund (FJPNX) fell by 6.8% in September 2015 from the previous month. In the three- and six-month periods ending September 30, the fund fell by 10.3% and 8.8%, respectively. Its returns for YTD (year-to-date) period stood at -0.1%—the only fund among the nine funds we’ve been analyzing in this series to have posted negative returns in this period.

The performance of the fund compared to its peers in this series can be broadly described as poor. Though it stood at fourth place in the quarter ending September 30, for all other periods it figured at the bottom of the list. For the six-month and YTD periods, it was the second-worst and worst performer, respectively.

Let’s look at why the fund’s performance was so poor for most periods in our review.

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Portfolio composition and contributions to returns

Launched in September 1992, FJPNX has a substantial track record. Since the latest complete portfolio of the fund available to us is from August 2015, we’ll consider that as our base. For September, we’ll consider valuation changes in our analysis. All portfolio percentages mentioned from here on will refer to portfolio weights according to changes in valuations between August and September 2015.

Below is the most up-to-date breakdown of FJPNX’s holdings according to sector:

  • Financials and consumer discretionary sectors are the core holdings of the fund, making up a combined 39% of the fund’s portfolio.
  • Industrials, information technology, and healthcare are the other sectors that have a double-digit exposure in the portfolio, together making up 39% of the fund’s assets.
  • Telecom services make up only 7% of the fund’s portfolio.

Now let’s look at FJPNX’s contribution breakdown from September 2015:

  • Health care was the highest negative contributor to the fund’s overall returns. Message Company, Astellas Pharma (ALPMY), and Hoya Corporation were primarily responsible for the underperformance of this sector.
  • Industrials followed healthcare, emerging as the second-biggest negative contributor to FJPNX’s returns. East Japan Railway Company led the decline, followed by Nidec Corporation (NJ) and Toshiba Corporation (TOSYY).
  • Telecom services came in as the third biggest negative contributor to the fund’s returns. SoftBank Group Corporations (SFTBY) was primarily responsible for the negative returns posted by this sector.

Other decliners included Sony Corporation (SNE) and Alibaba Group Holding (BABA).

Reasons for FJPNX’s poor performance

The fund’s poor performance for the quarter ending September 30 was offset by the fact that its picks in financials and consumer discretionary sectors did not perform as badly as some other sectors did. However, in longer-term periods, the fund’s exposure to these sectors harmed the portfolio. Stock picks in sectors like healthcare sector and telecom services hurt the portfolio as well in those periods.

Read the next part of this series for a look at the Nuveen Tradewinds Japan Fund Class A (NTJAX).

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