For more than three decades, Houston-based financial adviser Rob Scharar, a CPA and attorney, has invested in mid-cap companies in Japan, such as niche manufacturers with a limited investment following in the United States.
“I’ve learned from meeting Japanese CEOs in person in cities like Fukuoka that Japan’s niche manufacturers secured a solid global market share in part because of the concept of monozukuri, which entails a commitment to produce excellent products and improve their systems and processes continuously,” said Scharar, president of FCA Corp and the Commonwealth International Series Trust Mutual Funds, which includes the Japan Fund (symbol: CNJFX).
Defined by professor Takahiro Fujimoto of the Manufacturing Management Research Center at the University of Tokyo as the “art, science and craft of making things,” monozukuri is most clearly evident in Japanese niche manufacturers, most of which are managed independently, exercise excellent risk management, possess unique institutional knowledge, operate in a market with high entry barriers and rely on tight supplier networks.
“As we invested in publicly traded companies in Japan, the culture of these companies often embodied monozukuri. They have been run that way for a long time and many have no investor following in the United States. We try to bridge that gap. Our fund website includes Japanese stock exchange links, economic organizations and an interactive map of Japan,” Scharar explained.
In determining the right companies to invest in, FCA has formulated a “three R’s” test: real companies, real products, real financials.
“Because we are a fund that invests in Japan, our goal is to invest in a portfolio of companies that not only mirrors the market index, but also provides a diversified exposure to Japanese stocks that are not easily accessible to U.S. investors,” he said.
FCA focuses on companies that create diversified products and services, including manufacturers of everyday essential items, especially those that embody monozukuri.