mjohn707

To update, 6930:JP Nippon Antenna is up 58% @ 1050 yen from the original 665 yen, and I don't think it would be crazy to reduce or sell at this price. There have been some good signs with this name being that they completed a tender for a decent amount of shares and have had some operating improvements, and current prices are only just around net working capital and maybe 60% of TBV, but probably worth taking some money off the table at the very least

Interesting list, appreciate the work. It's funny that a lot of these names were discussed on the board a few years ago, I bet a lot of them had a nice run up and then sold off again. The Japanese market is completely mysterious to me

To update, I sold my shares of 6346:JP Kikukawa Enterprise yesterday for 403 yen, about a 40% return on the purchase price

There's a little toggle on top that hides it, you might have pressed it by accident or something. I've done it a few times

Other People’s Money with Danny Devito is my favorite

I tried to read Collapse but I just couldn't get into it for some reason. Tons of details in The World Until Yesterday, but I sort of like that, makes me feel it's more empirical and I can sort of draw my own conclusions The Easter Island case study was the most fascinating one for me as an example of societal collapse due to ecological damage. It's actually the only one that I can remember off the top of my head after more than a decade since I read Collapse last. Was it because they converted all of their resources into giant heads?

I tried to read Collapse but I just couldn't get into it for some reason. Tons of details in The World Until Yesterday, but I sort of like that, makes me feel it's more empirical and I can sort of draw my own conclusions

Has some interesting pictures too. My favorite is the photo someone got of a native man during his first contact with the outside world. You can see the absolute shock and horror in his face, just can't imagine what it would be like to be in his situation

I’ve always avoided anthropology since college when I took a required course that mainly consisted of taking lots of notes on what seemed to be an endless number of contradictory and implausible theories of human behavior. I also did not like Diamond’s previous book “Guns, Germs, and Steel,” which was recommended by Charlie Munger as an example of the multidisciplinary mode of thinking that he espouses. For me that book seemed like a plausible deduction that was either correct or just an artifact of data mining, and Diamond’s theory didn’t seem to me provable or disprovable, so the whole exercise seemed pretty pointless. So this new book had two strikes against it, and I didn’t plan on reading it. For some reason I did, and I can admit that I was wrong about my appraisal of Diamond and even about the subject of anthropology. “The World Until Yesterday” is a summary of Diamond’s long career of study of traditional cultures that existed before civilization, and many of the facts and theories are surprising. It’s possible that many of Diamond’s theories suffer from the same problems at least in part that “Guns, Germs, and Steel” suffers from, but if he’s even correct about the basic information and reporting it honestly, the book has a lot to say about far reaching topics, and the information seems underrepresented in the investing community. Among some of the interesting facts he discusses are that apparently humans had a biological form of birth control that functioned through most of human existence until diets began changing with civilization. He talks about abortion in traditional cultures, which was widely practiced but often ritualized in a way to keep it out of the sight of society. Diamond also debunks Buffett’s off repeated claim about how he or Bill Gates would have been useless outside of modern civilization (eaten by a tiger) with an example of Inuit ice floe fisherman, which I think has unusual similarities to the practice of investing. He debunks the paleo diet, and describes the real one that no one will ever want to practice although it likely would have some health benefits. He describes how quickly traditional cultures can adapt to modern practices once they are exposed to civilization, which involves social upheaval along with biological evolution on a human generational timescale, as well as tragic loss of life. He also describes how anthropologists can predict whether traditional cultures will be either completely pacifistic or more much more warlike than modern societies with just two variables. Diamond covers a bunch of other topics, and there are other descriptions of human behavior that seems surprising even though it was the norm through most of human existence. I can’t promise that this book will make you a better investor, but I think that a book that describes phenomena that would defy your predictions might have some value in a discipline where overconfidence has historically been a common downfall.

I like it too, really classes the place up

Just to update this, I sold my shares of 7314:JP Odawara Auto-Machine for 950 yen, about a 50% return in a pretty short period of time. I don't know what's going in in Japan, but the behavior of some of these investments seems way different that what I was used to seeing just a few years ago

John Henry vs the steam hammer I suppose. You always do find a few of the weird ones manually though

Thanks for the tip, will take a look at those two. Yeah I’ve been using Japan Express to translate the balance sheets as well

I think you are correct with all of this. Three years ago, I also read Gray and Carlisle's Qualitative Value. Their message based on results of their backtesting corroborates what you're saying. They also show that cherrypicking hurts results. Against Gray and Carlisle are the limitations of backtesting, such as not being able to account for transaction costs, etc. It is also impractical for most small individual investors to invest in all of the hundreds or thousands of stocks that pass the value screen. I think there are professionally run funds that do this, but I haven't looked too hard into these. That's why I decided to cherrypick, and to rationalize my bias by citing Graham, who was also probably just going by his gut when he advised to consider (unspecified) qualitative factors. I admit I chose additional filters because it felt more comfortable. Ultimately, it is subjective. I haven’t read Quantitative Value, but there were also some papers published by Tweedy Brown that had some backtesting information about statistical investing that I took a look at a few years ago. The problem I have with this stuff is I don’t feel like I know enough statistics to understand their conclusions other than the very basic return sort of calculations, so that’s as much of their conclusions that I’m willing to put into actual practice. I understand we’re basically in agreement then on all of this, all I’ll add is that in Japan I don’t think we’re generating enough statistical values at this market level to justify much cherrypicking. And if I had to cherrypick because of the sheer numbers of investment opportunities, I would do it randomly instead of emphasizing what factors I though would generate a higher returns, assuming pricing was similar. I don’t think we have enough information to do otherwise. In regards to Graham, from memory I believe that in the liquidating value chapters of Security Analysis he gives examples of companies that are losing money currently, have declining sales, declining book values, and even declining liquidating values. It always struck me how few guidelines he gives considering how detailed orientated he was as demonstrated by the various investment case studies he outlines throughout the book. I do think Graham is often enigmatic and knows more than he’s telling us, although I believe it’s at least in part because he thinks certain things aren’t scientific enough for what was basically a textbook that was supposed to be universally useful for the profession. In this particular section however, I don’t believe he’s trying to be obscure, I think he suspects that too many qualifications outside of price are not going to help investment returns in investments in securities priced this low. This is only my suspicion however

Despite these perennial concerns, I've had a Japanese basket for the past 3+ years. So far, the results are satisfactory or better (>70% total return when counting sells that ran up suddenly). I had no access to 10K type of reports, or any meaningful news reports. Too lazy even to use Google Translate. As you know, Graham in Security Analysis recommended looking for other qualitative factors to filter out stocks that pass an initial net-net screen. For my Japanese basket, I filtered out those that had declining revenue over the past 10-15 years, declining book value, and rapidly increasing shares outstanding. My predetermined sell price was based on reversion to the mean: sell when net-net, book, PE, or free cash flow value approaches or exceeds what was achieved in the prior 10-15 years. It was very simple, possibly too simpleminded. Because of my filter, I'm passing on everything on your list, although I am very tempted. What were your statistical or other filters you used to make you final selections? How have your selections worked out? If the info is handy, I'm specifically interested to hear how stocks you selected that didn't pass my filters worked out. Thanks. I think I first invested in Japan in 2014 or thereabouts after I read “Investing in Japan”, by Steven Towns (@activeinvesting on Twitter), which I think I saw mentioned on oddballstocks. Most of my results since then have been reasonable, part of that is more than likely due to the new highs the Japanese markets have been making I'm sure. I reread the common stock portion of the 1940 edition of Security Analysis during the course of my pass through the handbook. Graham is always interesting even when he’s discussing topics that have passed into history a long time ago, but the state of the equity markets in the US in 1940 and the Japanese Markets do seem to have some strange symmetries. I think it’s difficult to be very clever about statistical investments. I would bet, based on nothing but prejudice and a little experience in investing (and in my primary occupation), that the more filters of that sort you applied to a basket of statistically cheap stocks the worse you’d do on average compared to the full set of unfiltered cheap stocks. I think part of what we’re looking for with these things is the randomness and the free speculative value, and I think the wider the set the more room we have to let these factors play out as they usually will over time. I feel quite confident about this even though I don’t have any compelling direct evidence that it’s true, so take it for what it’s worth. I don’t think I know what filters will optimize returns and I don’t think that you know it either, although I could be wrong about this. We all have things that we like to see in investments, but I think that some of it is just prejudice and not rigorous when it comes to these statistical types of investments where we’re working with incomplete information. I tried to eliminate any bias of this type that I might have brought to the situation and so I just purchased things that were cheap based off of assets, earnings, or liquidation value. I believe in a big basket let’s just say. You can check on some of the other Japanese ideas I wrote up on the Investment Board, just sort it by author and look under my name. I wrote up a few ideas that all seemed to do okay, and I also invested in a bunch of others that were originally mentioned by West and a few different authors

I only have a few of my old positions left no, I’ve been selling them as they’ve run up

Despite the Nikkei being at something like a 21 year high, I think there are still some decent values in Japanese small caps. I recently flipped through the entire Autumn 2017 edition of the Japan Company Handbook (which took me about two months for the 1800+ pages) and I made 13 investments. A twitter follower (@valuewolf) tipped me on 3 of the 13. I believe that deep value Japanese small caps presently have a number of risks over and above your average US based small cap value, namely that you usually can’t get English language financial disclosures, you’re taking currency risk, management is possibly less shareholder orientated, you generally get poor liquidity and high trading costs, and undervaluation can seemingly persist for longer than it does in other markets. Despite these issues, I think a diverse basket of Japanese statistical bargains are a reasonable investment at current prices with a pretty protected downside. Just as a warning, the extent of the research I did on these names was reading the listing in the Japan Company Handbook and reviewing a few years of financial data in translation. Any sort of situation that I wouldn’t catch just with that I can promise I didn’t. Just wanted to point out that additional risk, and with that out of the way, here are the names. Also prices may be a bit out of date, but I don’t think anything has moved a ton either up or down since I invested 1. 5918:JP Takigami Steel @ 5560 yen. Trades about 60% of cash and investments less all liabilities. Has a poor earnings history, some hair with a price fixing scandal a few years ago 2. 6303:JP Sasakura Engineering @ 2549 yen. Maybe 60-66% of Graham style liquidating value depending on inventory mark, poor earnings history, may have an inventory issue 3. 6346:JP Kikukawa Enterprise @ 288 yen. Trades about 66% of cash and investments less all liabilities. Has a decent earnings history, about 75% of the company’s assets are cash and investments 4. 6930:JP Nippon Antenna @ 665 yen. Maybe 60% of liquidating value, has a poor earnings history, but pays a dividend and has repurchased shares 5. 6964:JP Sanko @ 505 yen. About 66% of liquidating value, poor long term earnings history but recently better. Pays a dividend and has repurchased shares 6. 7229:JP Yutaka Giken @ 2590 yen. Auto part supplier 70% owned by Honda. Trades about 50% of book value and at a PE of around 7. Has a well established and stable earnings record, decent balance sheet, and pays a dividend 7. 7314:JP Odawara Auto-Machine Manufacturing @ 638 yen. Trades at about 66% of cash and investments less all liabilities, pays a dividend, has a mixed earnings record 8. 7937:JP Tsutsume Jewelry @ 2140 yen. Money losing but below liquidating value. Management has large ownership stake, lots of cash, has repurchased 12% of shares since 2015. The company previously had a good earnings history 9. 8144:JP Denkyosha Co @ 1445 yen. 36% of book value, which is mostly rental real estate, securities, cash, and a long term bank deposit. The business is profitable and has a reasonable ROIC, stable and established earnings record 10. 8191:JP Hikari Furniture @ 5000 yen. 50% of rental real estate valued at a 7.5% cap rate plus cash, less total liabilities. Profitable and pays a small dividend, but very illiquid. At the current price the company trades at a large discount to the historical cost of the rental real estate 11. 6466:JP Toa Valve Engineering @ 1299 yen. 66% of liquidating value, profitable now, but previously had a good earnings history (@valuewolf) 12. 7501:JP Tiemco @ 591 yen. 52% of liquidating value and about 30% of book value. Poor earnings history, but very statistically cheap (@valuewolf) 13. 9885:JP Charle @ 521 yen. 66% of liquidating value, some small profits. Most of the assets are cash and investments. (@valuewolf)

I'm from this world and it seems like this would be pretty tough to do as an outsider in a industry you didn't know well. There are usually a lot of not so visible inputs that mom and pop are putting in that would be hard to replicate as a passive investor, and you could be in for some thorny regulatory and personnel issues, key man risk too. It just seems very tough when you don't have enough scale to pay a very large salary for a CEO type of position

I'd order a used copy, think it's half the price at least if you're in the US. Do you usually read everything on kindle? I still prefer paper

Careful readers of Warren Buffett biographies might recall that sometime around 1945 our adolescent hero hitchhiked from Washington DC, where his family was living at the time, to visit York Barbell in Pennsylvania. In those days York was the Mecca of physical culture in the US and thousands of young men around the country eagerly awaited each issue of the company’s Strength & Health magazine, which peddled the benefits of strength training along with weight sets and nutritional supplements. Under the leadership of founder Bob Hoffman, York sponsored weightlifting teams and athletes racked up an impressive record of Olympic medals and national and world championship wins that is probably unmatched by any other private organization. Many of the greatest athletes of the golden age of American weightlifting worked in the York Barbell foundry and trained at the company gym, and it was these athletes that a star struck young Buffett travelled to see. For a time at least York Barbell and Hoffman were what Arnold Schwarzenegger and Muscle Beach would be for a later generation. In Muscletown USA, John Fair describes how Bob Hoffman, who himself was not a talented athlete or weightlifter, used his unusual gifts for organization and promotion to develop York Barbell into the dominant firm of the fitness industry. In addition, Hoffman was able to sustain York’s preeminent role for 30 years until the combination of the company’s Olympic teams becoming increasingly uncompetitive against the state backed teams of the communist nations, changing consumer tastes, aggressive new competitors, management infighting, and Hoffman’s declining health combined to diminish the company’s position. Charlie Munger once mentioned in a Berkshire Annual Meeting that if he ever taught a class in a business school he would have his students go through the history of a company like General Motors along with the associated financial figures and have them try to relate how the qualitative and quantitative factors mesh up. John Fair seems to have hit on the same idea in this book, and he includes 50 years of York’s revenue history, which is more quantitative data than I can ever remember seeing in a company history. Fair’s book covers the company’s history from its earliest stages in 1929 past Hoffman’s death in 1985, and gives a detailed explanation of the various factors he believes contributed to the company’s years of success and eventual decline. I would recommend the book to anyone interested in the history of US weightlifting or anyone looking for an interesting case history covering a good portion of the life cycle of a business.

Amercian Steel, by Richard Preston, was originally published as a series of articles in the New Yorker Magazine concurrently with the steelmaker Nucor’s troubled construction of a new mill utilizing an experimental production technology. The articles were later adapted into this excellent book which is sadly out of print, but still available used from Amazon. Although the book is a few years old, the recent events surrounding Horsehead Holdings brought it back to mind because the early history of Nucor does have a strong resemblance to the Horsehead situation. Both companies made all-in bets on a new metallurgical process that promised unusual cost advantages, and while one was wildly successful the other seems, for now at least, to have been a failure. In the book Preston describes the technical aspects of steelmaking in a mini-mill plant, which is a fascinating process where scrap iron is heated to the temperature of the sun’s surface and coaxed through elaborate machinery until it becomes recognizable sheets or ingots. Molten steel is scary stuff, it can melt concrete and human flesh, it explodes like a bomb when it falls into water, and it can sometimes behave in weird ways for no observable reason at all. The people who work in the melt shops are a salty bunch who love working with raw steel despite the danger. As Preston describes it, working with steel is basically unscientific. Steelmaking lore is passed down between steelworkers, and many decisions on the production line have to be made on the spot by experienced workers based off of their intuition because there are no hard and fast rules. The experimental production technology in Nucor’s new mill gave the experienced steel men fits, and even at one point caused a huge explosion that destroyed a good portion of the mill and resulted in fatal injury for a worker. After lots of trouble in almost every aspect of the operation, the company did get the mill to produce efficiently and it later became the model for the many more mills they would build in the coming decades. Everyone reading this probably knows the story of Nucor and how successful they’ve become, what is probably less well known is how dicey things got for them at certain times in their history, and how many people, including the German engineers that created the new technology at the heart of the new plant, were convinced that they would fail. A board member who also maintains an outside investment blog recently wrote a thoughtful post (http://www.oddballstocks.com/2016/01/reading-resolutions-and-research.html) that comes to the heart of the matter, what can we as investors expect to learn from reading business history? Does reading a book like American Steel allow you to predict how a similar situation like Horsehead is going to play out, or is this stuff just sterile pondering that will never make you money? The answer IMHO is not that we should, in most cases, expect that history is going to be predictive of anything in the positive sense, but that its proper use lies more in the negative sense, and even then only probabilistically. That is to say that reading American Steel is not going to allow you to distinguish between future Nucors or Horseheads going forward, but it should at least warn a reader to be skeptical of new manufacturing processes which are historically problematic. It’s only a modest lesson, but it might save you a buck or two over your lifetime.

The Big Shot soda exists, trust me!

If they don't have the reports in pdf on the website you can just use one of the free edgar websites like secfilings.com to get access to PDF versions that print better than sec.gov

I always thought that the power-gamer types that write long strategy guides and figure out all the game mechanics out to the last hit point were wasting their talent and could make lots of money in the market.

Ever played the Europa Universalis games? I really like those