Nicholas Price, who runs funds including Fidelity Japanese Values (FJV) investment trust and Fidelity Funds Japan Aggressive Fund (LU0261965585), explains why he invests in Japan-listed Kubota (6326:TYO). The company manufactures farm equipment, engines and construction machinery.
"Kubota first launched made-in Japan farm tractors in 1960 and is now the country's leading manufacturer of agricultural and construction machinery, as well as being a key global player in the production of industrial diesel engines," says Mr Price. "With an overseas sales ratio in excess of 60 per cent, Kubota generates the bulk of its earnings in Asia ex Japan and North America.
"The mechanisation of agriculture across emerging Asia is a key growth driver for the company. By having the right products - small tractors suited for wet field agriculture - and the necessary distribution and service networks to access farmers, I believe that Kubota can maintain its dominant market share across much of the Association of Southeast Asian Nations (ASEAN) region."
ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.
Mr Price goes on: "Kubota also has considerable room for growth in the North America household, small agriculture and construction machinery markets. Housing activity has yet to recover fully in the US and by rolling out new products into existing channels I expect Kubota to increase its market share.
"Kubota's earnings sensitivity to global macro headwinds is relatively low and its niche products are less exposed to the agricultural machinery cycle than its peers. The company's ability to strike a good balance between investing for future growth and maintaining stable returns to shareholders further enhances its investment appeal.
"In an uncertain economic environment, Kubota's earnings stability and long-term growth profile are outstanding qualities."
Kubota was Fidelity Japanese Value's largest holding and accounted for 6.8 per cent of its assets at the end of November.
