Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Chemicals, equipment, machinery parts.

It's not sexy stuff. Certainly not as cool as games consoles, image sensors and flash memory chips. But who needs sexy when you can have excellent returns on your portfolio of tech stocks.

That's what JPMorgan Chase & Co.'s Japan Technology Fund did. It went for the mundane and posted a 107 percent return in the 12 months to Dec. 25, according to analysis by Bloomberg equity specialist Hayato Ono.

Relative Returns
A selection of tech-focused small caps outpaced Japan's broader Topix index this past year
Source: Bloomberg

It's not a fluke: The fund has returned an average 46 percent annually over the past three years, the highest among Japanese equity portfolios, and 47 percent over the past five years, the second-best performer over that period, Bloomberg-compiled data show. 

While bluechip staples such as Sony Corp., Nintendo Co. and Mitsubishi Electric Corp. got a slot on the team, the JPM Technology Fund loaded up on the likes of Naigai Tec Corp., Atect Corp., Nakamura Choukou Co., Hirano Tecseed Co. and Ishii Hyoki Co. Those companies all make machines or materials used in the biotech, semiconductor and display industries.

Nakamura Choukou and Naigai Tec, which make precision parts and machinery, were particular winners, providing the fund with returns of 348 percent and 236 percent respectively. A smaller holding, Yamashin-Filter Corp., which develops machinery and industrial filtration systems, turned in a 561 percent return.

Small Caps, Big Returns
JPMorgan's Japan Technology Fund picked a few big winners in 2017
Source: Bloomberg

The biggest loser was Broccoli Co., a Tokyo-based media company that publishes manga and video games. It contributed a loss of 35 percent over the course of 2017.

One obvious disclaimer is warranted: Past returns are no guarantee of future performance. And this particular fund benefits from being relatively small at just 3.5 billion yen ($31 million) in total assets, which means it can make big bets on small-cap stocks. Nakamura Choukou, for example, has a market cap of just $295 million, and that's after climbing 440 percent this year.

Yet the lesson seems clear for those chasing returns in Japan's tech sector: This is a country with a lot of hidden talent in equipment and materials. It's expertise that has been largely overshadowed by Japan's flashy gadgetry and highly prized component makers, as evidenced by battles for Sharp Corp. and Toshiba Memory Corp.

It's worth remembering, though, that without the machines, none of those games consoles, memory chips or flat-screen displays would be possible.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. The return to the fund may be different to the share-price return, depending on when the stock was added to the portfolio.

To contact the author of this story:
Tim Culpan in Taipei at

To contact the editor responsible for this story:
Katrina Nicholas at