mjohn707

Or the coronavirus thread. It was started fairly recently and has more posts than the Tesla thread, the Amazon thread, BAM, Google, ... I haven't looked at it in weeks, it's just too overwhelming. Haha same, that thread has turned into a monster. That thread is the most fun we've had in ages, and I highly recommend you catch up

You've reach some sort of maximum limit on REIT posts perhaps

Channeling Walt Whitman here, he is large, he contains multitudes

That was definitive for him? I'm not sure I'd go as far as thowed, but it's more directional than most of his letters. Take a look at his letters for hte past three years. Seems more hedged vs. this one. Marks ought to see if he can buy the Janus logo out of a bankruptcy sale or something, would suit his writing style

That was definitive for him?

Do you mind sharing some of the US names? Maybe not on this thread b/c it's for Japanese stocks tho. I mentioned some names in another thread here: https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/companies-with-a-fortress-balance-sheet-and-liquidity-at-the-moment/msg404747/#msg404747 What do people usually say, do your own research? Statistically though I'm not sure it makes a difference

sort of where I was coming from. risky strategy, but strong B/S companies wont give you the recovery appreciation of the more leveraged names. I sort of do a mixed strategy, focusing a little on banks now, which have strongish B/S but are highly leveraged as a biz model I don't think you have to go crazy here, but if you were heavy on safety before, full of net-nets and cash boxes, blue chips and the like, which were all priced relatively closer to riskier names before, it might make sense to devote some new money or rotate into some crummier stuff. You don't have to buy stuff that's on the verge of bankruptcy, but risk is much cheaper than safety now than is was before, assuming things don't go to complete heck at least. And I'm not sure it makes sense to rush in to safety now being that it's priced comparatively so much higher. Hard to know any of this for sure however, and it could be that things are worse than they seem with the covid mess

What are your favorites now? I'll just dump what I sent in a email earlier about that same topic, things I've purchased recently. A lot of this was ready, fire, aim, and some of it has run up since. Mixture of riskier stuff and sturdier stuff: CAL-I’ve seen this name over the years, got to like 1-2x projected ’20 earnings, pre-Covid. Cheap if they make it, but it’s rallied some since. Not overly indebted, but it’s retail. Has some established consumer brands CPRI-fashion name with tons of debt, but cheap on pre-covid earnings. Some established consumer names, not all of them in the greatest shape I think though DFS-killed even though it was cheapish before, likely some problems here with delinquency in a longer downturn, but got to a low earnings multiple GRIF-not beaten down as much as some other names, but I was a least familiar with it LAMR-Billboards don’t seem like a terrible asset, but this name was killed because of the debt. If it survives, a 10% earnings yield will be cheap MLHR-I’ve seen this name of the years, low or zero debt, less than 5x pre-covid earnings at some point, decent consumer brand RM-Beaten down name in the family industry, selling below private-market transaction value. You never know exactly what’s on their books or how they’ll hold up, but worth a bet I think SKX-Shoe company that had a 10% earnings yield, decent consumer brands, 1B+ in cash, low or no debt. Feel like they can survive and it was on the cheaper side TPC-Really beaten down construction name that I got really cheap, maybe 20% of book or something, and sold a bit after it rallied on me to use on other names VNO-the big REIT situation they always talk about, something like 9% cap rate at some point, depending if earnings hold up HBB-crummy white-goods importer, recognizable consumer brands with some secular issues maybe. Negligible book value, but a long record of decent earnings. Probably was 5x earnings at some point ZEUS-bought then sold this. Steel distributer that I bought cheap, maybe 35% of book, and it held up enough that I sold and put the money somewhere else. Still cheap here I think MNPP-bought this early in, maybe 8-9% cap rate on NYC real estate and a big shopping center. Weird structure because they only have small interest in most buildings. Could have held on for cheaper prices I imagine, and it’s certainly cheaper now FLXS-bought then sold. Who wants to own a turnaround right now when you can get something that pre-covid didn’t have problems, unless it’s way cheaper, and I don’t think this was anymore GTS-bought then sold this, was about even on it when everything else got killed WEYS-earlier in, but I was able to get a few shares cheaper. Boomer shoe brands, family controlled, well capitalized, double-digit pre-covid earnings yield WVFC-owned this before, didn’t realize they loaded up on corporate bonds in the last few years. Mark-to-market on these things must be lovely SWGAY-early in, has held up pretty well because it’s well capitalized, although the industry is going to have some trouble I expect outside of the turnaround issues here already LEVI-9-10% earnings yield, lots of debt but not a ton of net debt, iconic consumer brand STRT-Crummy no-earnings auto supplier, was at maybe 20% of book at the lows. No debt, but I bought this thing too early PVH-Maybe 5-6x earnings, but tons of debt and no tangible book value. Established consumer brands, and healthy sales grown pre-covid GCO-Mall shoe store at maybe 2-3x earnings. Cheap if they survive, but who knows RL-Maybe 10% earnings yield, no net debt & 1B+ in cash, family controlled. Struggling with sales growth pre-covid, but well established consumer brands SPG-mall REIT that sold off tons, has some debt, but seems cheap if they can survive. Maybe secular trend against them NEN-residential real estate, Boston apartments. Maybe 7-8% cap rate? Seems like it would hold up, below private market value but maybe not beaten down enough. Weird tax structure that will probably cost me more with the accountant that I earn on this thing CUZ-office rest that seems cheap, maybe 9% cap rate, reasonable debt levels OXM-Boomer apparel name that I’ve seen before in resort areas. 10%+ earnings yield at some point pre-covid at least, low or zero debt, sales grown issues LAACZ-got filled on 1 share of this thing. That self-storage CA real estate name that Chen was in and everyone talks about. Price has probably held up better than a lot of things

It seems to me that the better risk/reward now compared to before the covid crisis has drifted towards the names with worse balance sheets. They're down multiples compared to the better names, which have held up. Hard to know what survives if things stay bad for long enough, but I never thought I'd see fortune 600 names at 1-5x trailing earnings. Just seems like before the crisis, risky stuff and safer names were priced much more similarly, and now the balance is much different. Hard to know how it all shakes out, but I've sold some safety, Japanese cash boxes and al of that, for riskier stuff

It really seems like a lot of these Japanese net-nets have help up better than the market, or at least better than certain areas of the market, possibly because they're so well capitalized and names with debt have just been killed. In any case, I've been selling that names that have held up to buy US names that seem relatively cheaper now. Who knew that the only way these things would actually outperform the market would be in some sort of cataclysm?

I bought shares in 8050 Seiko Holdings just below current prices, maybe 1750 yen per share. Trades maybe around 70% of book, not including any current losses in the equity holdings, and something around 9-10X earnings. This is sort of on the more expensive side for a Japanese name, but the company has recognizable brand names in the popular line of Seiko watches, a significant export business, a number of new premium offerings, and pays a good dividend. The company's ROIC has been decent, and free cash has gone over the last number of years towards paying down debt. It's reasonable I think and at the floor of the 5-year average valuations.

7444-Harima-Kyowa also seems reasonable. At 1410 yen, shares trade for around 42% of book and a P/E of around 6.5. Historically, that's only about a 25% discount compared to the avg P/B, but the company's ROE and earnings history could I think justify a higher valuation. The company has low debt, a sufficient current ratio, and pays something of a dividend Harima-Kyowa_7444.xlsx

4629 Daishin Chemical seems reasonable. Shares trade for 45% of book, maybe 6x current earnings if the year finishes as strong as it's seeming, and around 8x average earnings over the long-term. On a book basis, it's about a 20-25% discount over the 5-year average, but I think that the company might deserve a higher valuation based off of the reasonably consistent ROE numbers. The company pays a modest dividend, but has not repurchased shares.

Thanks for posting. 7628 seems cheap. Market cap = $19.1 billion (the number on google finance is $21b, but I think they are including treasury stock?) Cash = $20b, total liabilities = $10b, net income ~ $3 to $4 b / year. Obviously they'll get hit hard by a slow-down in the auto-market, but it looks like they are built to last. Any thoughts on this one in particular? It looks reasonably cheap on an earnings basis if you give them credit for the extra cash, which is hard to do entirely in Japan it seems like. A bit cheaper than it's traded historically as well, maybe at 60% of book compared to a 5-year average of around 80%, but they're having a somewhat weaker year than FY2019. Their earnings do seem to bounce around a bit though. I think it's probably reasonable in a basket of similarly situated names, but not without risks considering what can happen to these names if they have a few really bad earnings years

Anyone keeping an eye on things with this latest downturn? Any low P/E names or anything like that? I'll post below what lit up on my watchlist, some of this is going to be repeated names, but it's stuff that I thought looked cheap at the current prices: 2055 4624 5918 5921 6303 6496 6648 6943 7229 7399 7501 7628 7902 7937 8144 9885

Done, and copy attached: Dear SEC Staff, I have read with the greatest excitement the SEC’s proposed changes to 17 CFR 240,15c2-11, and I urge the SEC to please approve these amendments as quickly as possible, as they will no doubt have a salutary effect for investors and their hard-won capital. I additionally have great faith that the SEC, acting with their usual wisdom and foresight, has carefully weighed the potential positives and negatives of this proposal, and I imagine it will be almost a chore to retrod arguments and points that that were already more eloquently stated, subtly argued, and augustly disposed of within the agency. And yet still as they say, out of the abundance of the heart the mouth speaketh, and I hope these quick thoughts might be of no great trouble, even if not of any great value. Take them as you might as a recitation of simple facts by a child, with a pat on the head and the patience we owe to all those in our charge. The SEC was established with a goal no doubt originally, and who can really recall exactly what it was, but it was likely something to the effect of protecting the capital markets against bad-faith actors, and allowing smaller investors, those without institutional access to trust and participate in the growth of the economy. We are of course all born with burdens to overcome, and it is clear that the SEC recognizes that their own burden was a mission improperly or inadequately stated, or perhaps just due for a sort of evolution to fit our modern circumstances. Either way, it is undoubtedly a fundamental truth that the most dangerous actor in the modern capital markets is no longer the penny-stock promoter or the speculative operator raising money from the unsophisticated, but is actually instead the investor themself, who has over a great deal of time repeatedly demonstrated that they are incapable of making prudent decisions with their own money. A brief list of examples follows. Funding Whitney Tilson’s hedge fund Participating in Tesla capital raises Investing in Enron shares Investing with Sanda Biglari Cheerfully paying 2 & 20 for investment advice I could list page after page of additional examples. Fundamentally the agency must understand that the goal of any new regulations must ultimately be to protect the investor from the greatest danger to capital formation in these benign markets, which is the investor's own poor decision making. And since the SEC’s mission, the very reason for the agency’s existence, is to protect investor capital, it must follow logically that the agency must seek to restrict, to the greatest extent possible under law, the ability of investors to make their own decisions. And fundamentally it must also follow that any rule that restricts an investor from making their own decisions must be deserved, reasonable, and inarguably correct. The proposed changes to 17 CFR 240,15c2-11 would eliminate trading in a huge number of non-reporting OTC securities, making these securities almost impossible to trade. Such a change would be tremendously helpful for investors, as it would eliminate at least one potential venue to continue to make poor investment decisions. Some would even argue that it would be wise if the rule could potentially be expanded at a later date to include a greater range of securities, perhaps to some or even most of the securities that trade in the more liquid markets as well. Any proposal or change to this effect, of potentially eliminating trading in a greater number or even all listed securities would no doubt be a tremendous outcome for greater investment protection, as it would come closer to achieving the agency’s true goal of protecting the investor from themself more completely. And certainly the agency could at least study the potential effects and benefits a wider ban would have for the investing public, but we must understand that the work of good governance is not completed in a day, and patience and small steps must be the order of everything. If for some reason these changes cannot be made, I would ask the SEC to implement some sort of rule, the nature of which is not particularly important, that will limit the options that investors have. Anything that restricts the ability of investors to make their own poor decisions about their capital will only be to their eventual benefit. Regards, mjohn707 Twitter participant

Bought a few hundred shares of 4624.T too. Looks like you can only get a fill when the mood in the market is a bit shoddy. I also gave back all my gains in 9142.T (GARP railroad stock) after they published a 5 year roadmap plan with more Capex even taking up debt. There was also an activist investor in it to no avail. I guess just scraping the bottom of the barrel avoids much downside. Lately, the Japanese stock market has been a bust for me. Isamu Paint (4624.T) is the only position I’m am holding right now. I’m far from an expert here, but when you get a nice pop in one of these names, decent enough that it changes the calculus of your risk and reward, don’t be afraid to sell part of your position or even all of it, especially if you’re in a dead money situation or even if the value accretion is low. These things aren’t compounders or whatever we’re calling them now, and unless there’s been some sort of sea change or you’re in a name that’s actually increasing in value, it doesn’t usually pay to hold out for the last 20%.

Interesting article for sure. I’ve heard the term salary man before, but I never really understood the full context of it all

For those who have access, there was recently a short article in the WSJ about Japanese banking stocks that I thought was interesting: https://www.wsj.com/articles/japans-tantalizing-bank-dividends-mask-a-world-of-trouble-11558439046

Interesting articles. Every time I think I know something about the Japanese market I run into something like this that surprises me

If you are looking to get started in value investing, and more importantly if you’re looking to start putting your own hard-earned money on the line using the modern principles of value investing, the first and most important thing you should learn is to lower your expectations. And while it’s true that in the dark ages of value investing you could expect to underperform the index for periods of time when low-cost stocks fell out of favor, but expect modest outperformance overall, that expectation has changed with our discipline’s current enlightenment. And it is undoubtedly true that if you carefully follow our modern guidelines to focus on business quality over all over factors, especially price, you can nearly be assured of not only underperforming the index periodically but also overall, and in many cases in such a magnitude that will shock and befuddle those ignorants who still cling to outdated notions such as the efficient market theory, which our discipline in recent years has strongly debunked on the downside. The most important truth is that the modern practice of value investing is not about outperformance, but instead about thinking in an enlightened way about business quality, and practitioners should not be deterred if business reality occasionally or even consistently fails to live up to our fine principles. The second most important thing is to realize that a proper understanding of the principles of value investing makes you a universal expert in nearly every field of human endeavor. And once you understand our principles, you will be equipped to speak authoritatively about such disparate things such as politics, psychology, foreign relations, and even economics. And you will undoubtedly find that you are always correct about everything, and that our principles are truly the key that unlocks all the mysteries of human understanding. Issues that the rest of society has struggled with for decades and centuries even will seem simple for you to solve just in a message board post, and you will be able to cut through a tangle of contradictory evidence with ease. You will be capable of other feats such as reading short books about bird migration or the nation’s sleep habits and diagnosing vast errors in the thinking of the less enlightened. Everything will be predictable to you, elections, the long-term results of business decisions, and even governmental affairs. And while others will still wander in the probabilistic world of fuzzy data and uncertain outcomes, you alone will know the deterministic truth of it all. In fact you will see more and more how the less fortunate of the world, those unenlightened by our principles, are deluded and misguided, and that their delusion strangely runs in the direction of keeping you out of the rightful position of authority that you will merit. Practitioners have no other recourse but to patiently explain to other parties their failings until society recognizes the intellectual bonanza of our discipline hidden in plain sight. The whole world is truly your Gordian Knot, and your mind will be a sword. The last and most important thing to learn is that as a repository of great wisdom and insight, you must find the correct balance between projecting an aloof arrogance and aggressively attacking the less enlightened. There is no better way for our discipline to maintain its influence than to always demonstrate to others our own tremendous and unshakable self-regard, and our absolute conviction in every pronouncement. In the dark ages of value investing there was an overreliance on producing actual results to demonstrate the worth of the discipline, which could not be relied on consistently even then, and is fleeting at best in these current times. We modern practitioners must go a step further than the retiring Benjamin Graham or the modest Walter Schloss and summon a belligerence of spirit that would have been considered counterproductive to the scholarly and workmanlike fathers of our discipline. We have truly added heaps and heaps, great dumps and piles onto the modest inheritance of these great men, and no doubt the discipline is all the greater for it. I hope these few quick thoughts will be helpful to you and other young people interested in value investing. The discipline is admittedly quixotic in a financial aspect, but I think can be fruitful intellectually for the select, especially if the select might have a little inherited money.

I finally made it to the end of this list, and I think there are a lot of good names here. Besides the ones I already owned, I might have only passed on one or two at current prices. Worth taking a look if you're looking for names

In my opinion and in my experience, you can make money buying names that are net-nets or names that are trading at low PEs. We may all have our preferences on what sort of names we might like or feel better with, but I'm not sure it actually makes a difference as far as results, and I think a lot of this might just be a translation error from our experience in the US markets that might not apply here. In reference to the supplier slaves, I've made money in those. I've also made money in construction names, textile names, and refrigerator companies. 6411 Nakano Refrigerators was written up on this board at some point and I think people did fine with that name, it was probably more than a double if you held on. I made a decent return on a Toyota Group automotive supplier, I think they made rear-view mirrors or something, but it worked out. And you can find construction names occasionally that trade for a percentage of cash and investments less all liabilities. I had a few of those and they worked out as well. I owned a textile name that was very cheap on a NCAV basis and I think it was taken out in a MBO. Wasn’t for a huge premium or anything, but it was a decent amount more than I paid. Cheap is what seems to work in Japan. Maybe other things work too, but cheap is easy. I'd say find net-nets that are among the cheapest in the markets, especially when they're trading at or near historical valuation lows. Find low PE names where the earnings have been stable or increasing for a while, but the PE is lower than it has been historically. Or even try cyclical names where there was a good earnings history at some point but the current earnings are weak. If you can find those cheap on a TBV basis and compared to their historical earnings, they seem to work out as well. There are a lot of cyclical industrial names in Japan, and it seems like they get beat up when their earnings decline, and they go back up when their earnings recover. I've played a couple of those and made money. You can find names that are sort of a blend between these categories as well. Sometimes it's a net-net and an earnings recovery play at the same time, that sort of thing. All of these strategies seem to work given a little time, and I don’t think it pays to be dogmatic here with any of this.

Looks like it was delisted a couple of months ago already? Yeah, this was a little while ago, just took some time to try to figure out exactly what happened. It’s easy to miss or ignore press releases when they’re just in Japanese, but I think it’s important to at least try to understand them

It looks like 8191:JP Hikari Furniture is going private at 6710 yen per share, which is about a 34% return on the purchase price in a bit over a year, at least if I'm reading the filing in translation correctly