Japanese Basket

[Spekulatius]

I have mostly purchased stocks in semi attractive business with growing top and bottom lines, selling at single digit PE’s and paying at least an increasing dividend.

 

I have avoided these money losing or barely break even companies or those that are supplier slaves to keiretsus. So no iron bridge construction, textile or refrigerator companies for me. The movements in the Japanese stock markets are a total mystery to me, but from time to time, companies ai know get really cheap, even though the business isn’t changing much. so, I buy what looks cheap, with a good balance sheet (net cash) and paying increasing dividends over time and just ride them - hopefully up.

 

It works more often than it does not and is often not correlated to other stock arrests either, although then Japanese markets sell of, they really do!

[mjohn707]

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.

 

[Foreign Tuffett]

This name has already been mentioned by mjohn707, rukawa, and Janeo, but I figured I would throw my two cents in.

 

Sanko Co (6964) (per Bloomberg) "manufactures, assembles, and markets metal molding, press, and mechatronics products. The Company also makes electronic power tools, precision parts for automobiles, air-conditioning units, and plastic moldings." Sanko is based in Shiojiri , Japan. If you've never heard of Shiojiri, that's probably because it's population is well under 100K. With all due respect to the residents of Shiojiri, this is a boring business based in a boring place.

 

@ 449 a share Sanko trades at a ~57% discount to $0 enterprise value. If you add the long-term investment securities it owns to current assets, it trades ~55% below NCAV. Company has been solidly profitable over the last several years. However, as mjohn707 mentioned earlier in this thread, results in fiscal years 2015 and 2016 were around break even. Finally, this is a very small company, the market cap is the equivalent of just over $36 million USD.

 

 

 

[cameronfen]

These guys have an interesting stratagy( http://sureinvesting.libsyn.com/private-equity-investing-in-the-public-markets-with-dan-rasmussen-and-nick-schmitz ):  Basically cheap on an ev basis with most of the ev being debt.  They say there strategy works best in Japan for a variety of reasons:  not only is japan cheap, but it's also basically impossible to go bankrupt, and paying back debt fixes the corporate governance risk in Japan. 

 

[Janeo]

Hey guys, I stumbled upon the online version of the Japan Company Handbook recently. It seems to be a monthly subscription service. Just wondering has anyone tried it before?

 

https://shikiho.jp/stocks/6964/#news_shikiho

[writser]

These guys have an interesting stratagy( http://sureinvesting.libsyn.com/private-equity-investing-in-the-public-markets-with-dan-rasmussen-and-nick-schmitz ):  Basically cheap on an ev basis with most of the ev being debt.  They say there strategy works best in Japan for a variety of reasons:  not only is japan cheap, but it's also basically impossible to go bankrupt, and paying back debt fixes the corporate governance risk in Japan.

 

That actually sounds quite sensible.

[Spekulatius]

They say there strategy works best in Japan for a variety of reasons:  not only is japan cheap, but it's also basically impossible to go bankrupt,

7238.T ( Akebono Breaks) will Test that hypothesis. Terrible looking balance sheet and ominous language in their last quarterly report about going concern. This is an interesting case, because Akebono is actually a decent brand name in its space.

[cameronfen]

They say there strategy works best in Japan for a variety of reasons:  not only is japan cheap, but it's also basically impossible to go bankrupt,

7238.T ( Akebono Breaks) will Test that hypothesis. Terrible looking balance sheet and ominous language in their last quarterly report about going concern. This is an interesting case, because Akebono is actually a decent brand name in its space.

 

One company went bankrupt on the Nikki last year (at least according to them).  I wonder if it will be Akebono will be that one this year (I havent looked at the company). 

[mjohn707]

Hi there. First time posting and thought I’d give this topic a little bump given the amount of cheap stuff that surfaced/got cheaper due to the poor performance of the JP market over the past yr.

 

Here’s sharing my holdings in hopes to draw out like-minded investors. ;D

 

2055.T NICHIWA SANGYO CO LTD

3426.T ATOM LIVIN TECH CO LTD

3892.T OKAYAMA PAPER INDUSTRIES CO

4624.T ISAMU PAINT CO LTD

5900.T DAIKEN CO LTD

5951.T DAINICHI CO LTD

5983.T IWABUCHI CORP

6466.T TOA VALVE ENGINEERING INC

6648.T KAWADEN CORP

6943.T NKK SWITCHES CO LTD

6964.T SANKO CO LTD

7399.T NANSIN CO LTD

7521.T MUSASHI CO LTD

7559.T GLOBAL FOOD CREATORS CO LTD

7877.T EIDAI KAKO CO LTD

7902.T SONOCOM CO LTD

8144.T DENKYOSHA CO LTD

9885.T CHARLE CO LTD

 

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

[Janeo]

Almetax Manufacturing 5928 is also an interesting one.

 

It's a Japan-based company principally engaged in the manufacture and sale of building materials centering on special customers in housing related markets. >30% s/o is owned by a major customer.

 

It's a low ROIC and margin biz but now trading at NCAV and under 40% pb. A decent chunk of non current assets consists of land and investment securities, with each category making up ~40% of current mcap. It pays a ~4% div as well so you're getting paid while you wait. Couldn't help myself and bought some recently ;D

[Foreign Tuffett]

Below are two articles that I think are germane to this topic. As the founder of Varecs Partners, a Tokyo-based fund that specializes in small Japanese companies, Jiro Yasu has a good understanding of the types of companies mentioned in this thread.

 

http://www.varecs.com/en/2015/necessity-is-the-mother-of-invention/

 

http://www.varecs.com/en/2017/necessity-is-the-mother-of-invention-vol-2/

[SHDL]

Below are two articles that I think are germane to this topic. As the founder of Varecs Partners, a Tokyo-based fund that specializes in small Japanese companies, Jiro Yasu has a good understanding of the types of companies mentioned in this thread.

 

http://www.varecs.com/en/2015/necessity-is-the-mother-of-invention/

 

http://www.varecs.com/en/2017/necessity-is-the-mother-of-invention-vol-2/

 

The guy nails it. These articles should be required reading for anyone interested in the Japanese stock market.

[mjohn707]

Below are two articles that I think are germane to this topic. As the founder of Varecs Partners, a Tokyo-based fund that specializes in small Japanese companies, Jiro Yasu has a good understanding of the types of companies mentioned in this thread.

 

http://www.varecs.com/en/2015/necessity-is-the-mother-of-invention/

 

http://www.varecs.com/en/2017/necessity-is-the-mother-of-invention-vol-2/

 

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

[Foreign Tuffett]

Note that Japanese markets are going to be closed until May 7th.

[Foreign Tuffett]

Joban Kaihatsu (1782) update based in 3/31/19 financials. All #s are Japanese Yen.

 

Stock Price: 5020

 

Per Share Dividend: 270

 

Market Cap: 3.936B

 

NCAV: 4.651B

 

Long Term Investment Securities: 1.364B

 

TTM Operating Profit: $1.706B

 

[Spekulatius]

^ Seems splendid cheap. While not as cheap, I have been buying a bit of Nitto Denko 6988.T, which is an international Japanese chemical/material company (the Japanese 3M). they produce tapes made for semi/wafer processing and protection ,as well as materials used for displays, semi manufacturing etc. Higher margin stuff. ~30% of the market cap in cash.

Earnings are down somewhat as their end markets have weakened.  I think they have decent LT prospects and pay a rising (now ~4% dividend). They also have an US ADR.

[LongHaul]

A few sites I found helpful. 

 

Good PDF translator.  Website is confusing but does a decent job translating larger PDF's

https://www.onlinedoctranslator.com/translationform

 

Japanese Financials site

https://www.kaijinet.com/jpexpress/Default.aspx

 

 

 

 

 

[CorpRaider]

Interesting thread.  Not sure if I already mentioned this, but I punted and decided to outsource to IVAL.

[mjohn707]

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

[Foreign Tuffett]

Finally was able to get my grimy hands on a tiny position in Isamu Paint last night. Only took 5 weeks for the order to fill.

 

I don't know if this has been mentioned in this thread yet, but (IMO) one of the reasons why many of these tiny "J-nets" are so cheap is that they are horribly illiquid, partially due to trading in only 100 share blocks.

[Foreign Tuffett]

Here's an interesting blog post from "Undervalued Japan" on a microcap Japanese company with a management team that hasn't hesitated to damage shareholder value in order to maintain control and independence.

 

http://undervaluedjapan.blogspot.com/2019/08/j-net-kawasumi-laboratories.html

[Foreign Tuffett]

I suppose it's a matter of personal preference, but I can't imagine working for a company that dominated nearly every aspect of my life. Apparently in Japan such is the norm for big companies.

 

https://www.kalzumeus.com/2014/11/07/doing-business-in-japan/

[mjohn707]

I suppose it's a matter of personal preference, but I can't imagine working for a company that dominated nearly every aspect of my life. Apparently in Japan such is the norm for big companies.

 

https://www.kalzumeus.com/2014/11/07/doing-business-in-japan/

 

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

[SHDL]

I forget when I first saw that article but it was a good one for sure.  Quite accurate too, from what I know.  I think it also nicely highlights a lot of structural issues that are holding their economy back.  My contacts tell me that things have started changing a lot over the last ~5 years though (e.g., some of their best engineering talent is now avoiding the salaryman-at-a-megacorp career route and going straight down the startup/entrepreneurship path after graduation, which was previously almost unheard of).

[Jurgis]

From what I heard from friends, xenophobia even in engineering is still pretty high. My married-to-Japanese fluent-in-Japanese friend got interviews in some Japanese cos, but there were interviewers who were visibly uncomfortable with the foreign white man...