The Jupiter Japan Income fund is hoping a pair of well-known brands confounding cynics will help to drive long-term returns, as the managers remained sanguine on the outlook for dividends in the country.
Co-managers Dan Carter and Mitesh Patel told Investment Week perceptions that Sony was "a dead company" that was "relevant 20 years ago" and that Toyota was lacking in battery technology were "fundamentally misplaced" and showed "inefficiencies in the market" that can be exploited.
Meanwhile, after a sharp drop in the Japanese stockmarket and a swathe of dividend cuts or deferments across the globe, the pair believe Japanese payouts will "stand up well versus many other major economies", due in part to "conservatism at the top of corporate Japan".
Carter and Patel's £679m fund bought a stake in Sony in March 2019 at around 5,000 yen, with the stock ending the year in the top ten holdings and as one of the fund's best performers for the year.
It peaked at a 19-year high 8,000, before falling in the coronavirus sell-off but recovering to trade just below 7,000 today.
Patel noted that despite negative perceptions from many market participants, Sony had "transformed itself from being a low-margin, uncompetitive hardware business to a world-class entertainment and content business".
It has three "world-class" divisions in Playstation, its music and movies business and semiconductors, which it has now managed to monetise successfully.
On Playstation, the important area to note was the "online multi-player network akin to a Netflix" it had built around the actual console. "There are a hundred million users playing Sony games, and Sony has monetised them on a subscription basis, which transformed the profitability of that division," Patel said.
In addition, Sony had struggled to monetise its music and movies business, but with the rise of streaming services like Spotify and Youtube, "all of a sudden Sony becomes the number one library in the world".
Its semiconductor division, meanwhile, continues to benefit from the smartphone usages of its products, which go into making things like cameras.
Patel continued: "So you have three pillars that are all world-class driving the earnings. For us, the market is starting to appreciate real value here again."