west

All of the studies I've read say that a blind holding period of 3 years generally outperforms a blind holding period of 1 year despite the fact you may no longer be in the cheapest stocks in the market. Why? The winners run? Who knows. I have never verified this myself though, so I don't know how much I trust it. There's a lot of backtesting strategy lore thrown around. I've tested very little of it so it's still postulation in my mind. For example, Greenblatt says Magic Formula picks beat the market even more so if blindly held for three years. He also says that normalizing EBITDA over 3-5 years for the EV/EBITDA calculation improves the Magic Formula results. I have tested this one, and this hasn't been true from my tests of it. So, yeah, lots of quant strategy lore...

Is the low ROE partially due to holding significant excess cash? Although Japan is not the US, it's still reasonable to exclude obviously excess cash from the ROE when calculating the quality of the business, imo. Sure, the ROIC is much higher than ROE for these companies due to all the excess cash & investments on the balance sheet doing nothing. But what's the point if they keep hoarding all this cash for decades? If nothing changes in Japan the 2% ROE companies will continue growing BV by ~2% p.a. So unless the market decides to rerate the P/B at which these companies are trading you are stuck with a basket of perennial net/nets with stock prices that increases by 2% p.a. on average. Granted, it is probably an ok approach to buy a basket of these stocks. You have a huge margin of safety and occasionally something good will happen either with the stock price or the underlying business. However, given the choice I'd rather buy something like Fujimak, maybe not the cheapest net/net out there but it grows book value by ~10% p.a. I would expect that to be reflected in the stock price over the long term. The way I see it you get paid to wait. A somewhat higher ROE suggests either a better business or better capital allocation and that's what I prefer in the long run. Especially in Japan, given the lack of shareholder activism. writser, there are a few others like Fujimak that I haven't posted yet. I've been slacking on buying them because I hate pulling the trigger on things. I like to overanalyze things. Forever. Pester me regularly (I don't mind) and the chances are much better you'll see the ideas sooner :)

Great thought. My data is essentially what's in Damodaran's Japan data sets. I can dig into the data a little bit more than what you can with his data, but not much more. They have most of what you need to know, and I think you should check the rest by hand anyways. If I had known about his data when I first started I probably wouldn't have written my program. Fwiw, here is a link to the beginning of 2014's data: http://www.stern.nyu.edu/~adamodar/pc/datasets/Japancompfirm.xls He also has data going back further but, unfortunately, you can't really do long-period back testing with it because he does weird Yen->USD conversions before, I think 2007 or 2008. And they're not simple conversions. He does the whole by-the-book process where, say, cash is at current exchange rates, COGS is at the average exchange rate over the period analyzed, etc. It's all quite stupid. I'm glad he wised up and started keeping things in yen.

writser, Thanks for pointing out Okayama Paper. My program dropped the data for it for whatever reason. I spent some time looking at it. It's cheap on an assets basis (negative EV as of today), but I'm a little nervous about it's lack of earnings power and the fact that EBIT and EBITDA margins have been in decline for the last five years. It could slip into negative earnings/FCF territory very easily if this keeps up. Did you see this?

For those asking, the proprietary program is not going to do most people any good unless you're very confident with large data + data munging. It does do output to Excel, which would probably be useful and I can post some time in the future, once I've run the program to get new prices again.

Kind of busy, so I'll quickly respond. I use a proprietary program I wrote to look for high ROIC, low ROIC variance, low EV/Normalized and TTM EBIT companies. I add to this list companies that have low P/TBV plus medium to high-ish BVPS growth rates (with the growth having low variance from year to year). I then pick through the list by hand, checking accruals, DSO+DIO+DPO+CCC, and that my program did EV and ROIC calculations correctly. My position sizes are not more than 2% except for in the case where I need to because the minimum block size to trade the company requires me to go above that threshold. And the company is worth the risk. My total allocation to Japan is going to be 30%, maybe 35%, of my portfolio for everything for a grand total of about 15-17 Japanese stocks.

Here's one for all the is-the-market-overvalued? posters out there: "In market analysis there are no margins of safety; you are either right or wrong, and if you are wrong, you lose money." - Benjamin Graham, Security Analysis

Unfortunately, I just saw the SEC filling, which doesn't provide any specifics.

PM me about it in a week? I'm in the process of buying them for the (grand total of two) accounts I manage right now, but I'd be happy to disclose them all once I own them. I've just been dragging my feet on purchasing them (... and they are a *little* illiquid... but most aren't that bad). I plan on posting some of the better ones to here once I've bought them all. Fujimak is still one of the best.

For those who follow the Oceanstone Fund (which has been mentioned both here and in Fortune magazine a few times), I have some bad news. Unfortunately, James Wang has passed away and the fund will be shutting down: http://www.sec.gov/Archives/edgar/data/1366043/000116204414000830/ocean497201407.htm I don't think he was that old...

Lots of small (nano?) caps in Japan. Nothing quite like average historical ROICs in excess of 20% with EV/TTM EBITDA of 2x or less, coupled with no net debt, a P/B of < 0.5x and BVPS increasing 10%+ every year for the last few years. In this spreadsheet I'm looking at now I'm counting five companies with those characteristics, and that's just glancing at it. I don't know if that's your typical cup of tea though. It seems like you generally like > $100m market cap companies (where you can read the financial reports)? One that meets that requirement that may be up your alley is JP:6425. There's some controversy around it currently, but it does look like they have some information in English.

I have a hunch that this WSJ article showed up for a reason. It just so happens that a re-issue of the book is coming out in the next month. I'm guessing someone bought the publishing rights... Still, I ordered a copy. A used one :D

Where can we see this VIC consensus you're talking about?

Sorry for the delayed response. I haven't mined the data for the "best poster", but with a little bit of Excel work it wouldn't be difficult to do so. That being said, most people haven't posted that many ideas so I doubt you could determine the "best poster" accurately anyways. There's not enough data for statistical significance. I just search for a poster in the list whenever a new ideas pop up myself.

When I was looking into it a year and a half ago, the Missing Manual for Excel book worked great. As for websites, I couldn't find any that were consistently good. They all were either old or had way too much sales pitch to valuable content. If you work your way through the Missing Manual book (which is probably one of the easiest tech books I've ever read) and search youtube for auxiliary info when you don't understand something, you should end up with a very good working knowledge of Excel.

Let's hear it for the great guy who runs this incredible website! Happy Birthday Sanjeev!

My pleasure, everyone :).

I think you've got the right idea. Find one good idea and research the hell out of it. You can worry about just "covering the essentials" of an idea once you've got practicing learning everything about your idea down. So know the company, its industry, and its competitive environment front and back, in and out. If the stock drops, you'll need to know what's going on. If you don't, you're flying blind and either might sell out because you're scared and don't know what's going on. Or you might keep on holding on when you should sell out. I've experienced both situations, just because I didn't do my due diligence all the way in the beginning. Lots of money lost. Also, for what it's worth, I would put real money on the table, even if it's just a little bit. You learn a lot more that way. I'm a screener nut. I wrote some software to mine equity data for pretty much all of the developed world. It's pretty sweet. However, now that I've developed this sweet tool that's way better than any free screener... My best ideas come from other people. So forget screeners. Look at what smart people are posting and clone them, but only after doing all your due diligence first. Here's the returns for the ideas, by poster, on COBF as of 9/13/2013: http://cobff.chrisdrane.com/ Attached to this message is a '|' delimited CSV file for all of the VIC posts from 2000 (when VIC started) to 2013. It has the beginning price for each recommendation (what the price was stated in the recommendation), the actual split-adjusted price for the idea recommendation date, and the 1 month, 2 month, etc return data. Look at who has good returns for their ideas, then reverse engineer their thinking in their original post. Enjoy vic-for-cobf.csv

Oh, and there are a million different submarkets inside of the software industry. It's not like, say, coal or power plant or banks where once you get the gist of one company in the industry it's not too hard to get up to speed with another one. Example subindustries: virtualization, human resource software, banking and finance software, operating systems, network systems and network hardware, etc. Lots of different subindustries to learn everything about.

(Ex?) software engineer here. Other people might have a differing opinion, but my feeling is unless you understand the technology, just avoid this sector. I designed software for WAN acceleration network hardware (http://www.riverbed.com/) and I still avoid this sector. There's too much disruptive innovation, it's very hard to understand everything that's going on (both technologically and competitive environment-wise), and things tend to be overpriced. Sorry if this isn't the answer you want to hear...

Yeah, well, I'm the guy who introduced Warren to Todd and I spoke to them both last week and they both said it was 500 pages a day, not 500 pages per week. Joking aside, it would be nice to have some source information on this before everyone jumps on the bandwagon and assumes that one post out of the blue makes 500 pages/week the truth and not 500 pages/day.

Good stuff. Thanks for posting!

And I second the recommendation! It's a great book, especially if you're new to understanding the math/fundamentals of valuing a company using a value investing mindset. This book took what were soft concepts and turned them into a hard, numbers based framework for me. The framework isn't an end-all/be-all, but it's a good place to hang everything else you learn on (to start off with). I can't recommend it highly enough! (And I wish Greenwald would write more books.)

I vote Palantir for "Most disturbing profile picture." Yes can I vote Palantir change his profile pic. It has honestly tainted my perception of him, and I've never met him :) LOL I feel the same way. +1 +2. And while it's stupid, I definitely agree on the whole "tainting my perspective of him" bit. I've got no idea why.

Tired. And on phone. Excuse the brevity. I posted related to this a while back: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/diff-ing-10-ks-versus-10-kas-(or-any-other-docs-for-that-matter)/