Author Topic: Finding Japanese Net-nets  (Read 37368 times)

randomep

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Re: Finding Japanese Net-nets
« Reply #40 on: August 06, 2014, 10:56:49 AM »
Some of these companies are running overly conservative balance sheets, which is affecting their profitability.  9760 is a good example of what I was talking about earlier where the nature of the assets listed as long term investments is important.  If they are marketable securities then it is obviously undervalued even if there isn't a business there at all, and the business wouldn't look nearly as bad if you excluded those securities and the excess cash when measuring profitability.

What we need is someone who can read Japanese.  We are really shooting in the dark on this hunt.

I have Japanese relatives and I work in a Japanese company. On occasion I have prodded them to translate. But they don't help much at all, the small cap financial reports are just management-speak w/o delivering much information.


writser

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Re: Finding Japanese Net-nets
« Reply #41 on: August 06, 2014, 11:14:56 AM »
Yeah, most of these have a < 2% ROE for the past decade, it looks like.

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.
« Last Edit: August 06, 2014, 11:26:15 AM by writser »
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writser

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Re: Finding Japanese Net-nets
« Reply #42 on: August 06, 2014, 11:22:37 AM »
Thanks for directing me to morningstar.  I didn't even know they had Japanese stocks on there.

I am inept when it comes to technology, so this may be a stupid question.  But how can you translate the reports in chrome?  When I tried finding annuals on TSE they only came up as PDFs.

The Japanese equivalent of the SEC filings page is EDINET: http://disclosure.edinet-fsa.go.jp/EKW0EZ1001.html . If you run a search query you can view the resulting documents online or download them either as PDF or XBRL. Download the XBRL version (it's a zipfile), unzip it somewhere and you can open the HTML-files it contains with Chrome.
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cobafdek

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Re: Finding Japanese Net-nets
« Reply #43 on: August 06, 2014, 12:21:27 PM »
Thanks for directing me to morningstar.  I didn't even know they had Japanese stocks on there.

I am inept when it comes to technology, so this may be a stupid question.  But how can you translate the reports in chrome?  When I tried finding annuals on TSE they only came up as PDFs.

The Japanese equivalent of the SEC filings page is EDINET: http://disclosure.edinet-fsa.go.jp/EKW0EZ1001.html . If you run a search query you can view the resulting documents online or download them either as PDF or XBRL. Download the XBRL version (it's a zipfile), unzip it somewhere and you can open the HTML-files it contains with Chrome.

How are your Google Translates working with Japanese?  My past experience has resulted in some bizarre translations, possibly related largely to different syntax (Japanese and Korean syntax is heavily dependent on declension/conjugations, kind of like Latin, whereas English and modern European languages and even Chinese rely more on word order in sentences). 

oddballstocks

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Re: Finding Japanese Net-nets
« Reply #44 on: August 06, 2014, 12:45:15 PM »
Thanks for directing me to morningstar.  I didn't even know they had Japanese stocks on there.

I am inept when it comes to technology, so this may be a stupid question.  But how can you translate the reports in chrome?  When I tried finding annuals on TSE they only came up as PDFs.

The Japanese equivalent of the SEC filings page is EDINET: http://disclosure.edinet-fsa.go.jp/EKW0EZ1001.html . If you run a search query you can view the resulting documents online or download them either as PDF or XBRL. Download the XBRL version (it's a zipfile), unzip it somewhere and you can open the HTML-files it contains with Chrome.

How are your Google Translates working with Japanese?  My past experience has resulted in some bizarre translations, possibly related largely to different syntax (Japanese and Korean syntax is heavily dependent on declension/conjugations, kind of like Latin, whereas English and modern European languages and even Chinese rely more on word order in sentences).

My $.02, if you're investing at a big enough discount I'm not sure the minutia in the filings matters all that much.  If you can read the essence of the filing and know that the business isn't going under then you should be fine.  I will invest in these things without reading anything beyond the financials or a few metrics.  Most investors probably think I'm crazy, and I'd agree to that, but to each his own.
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writser

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Re: Finding Japanese Net-nets
« Reply #45 on: August 06, 2014, 01:04:55 PM »
Agreed with Nate: in most cases I'm fine with an imperfect translation. I uploaded the Fujimak annual a while ago: http://www.writser.nl/fujimak/translated.htm , translated in English. I'd say it is quite understandable. Good enough for me in any case.
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randomep

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Re: Finding Japanese Net-nets
« Reply #46 on: August 06, 2014, 01:10:09 PM »
Thanks for directing me to morningstar.  I didn't even know they had Japanese stocks on there.

I am inept when it comes to technology, so this may be a stupid question.  But how can you translate the reports in chrome?  When I tried finding annuals on TSE they only came up as PDFs.

The Japanese equivalent of the SEC filings page is EDINET: http://disclosure.edinet-fsa.go.jp/EKW0EZ1001.html . If you run a search query you can view the resulting documents online or download them either as PDF or XBRL. Download the XBRL version (it's a zipfile), unzip it somewhere and you can open the HTML-files it contains with Chrome.

How are your Google Translates working with Japanese?  My past experience has resulted in some bizarre translations, possibly related largely to different syntax (Japanese and Korean syntax is heavily dependent on declension/conjugations, kind of like Latin, whereas English and modern European languages and even Chinese rely more on word order in sentences).

My $.02, if you're investing at a big enough discount I'm not sure the minutia in the filings matters all that much.  If you can read the essence of the filing and know that the business isn't going under then you should be fine.  I will invest in these things without reading anything beyond the financials or a few metrics.  Most investors probably think I'm crazy, and I'd agree to that, but to each his own.

No I don't think you are crazy at all!

Let's invert the problem. When was the last time you lost money because you failed to read some minuta in the management discussion?

When I look at financials I just jump to the balance sheet and income statement. Then I look around and get an impression of the company from their website (esp. for japanese companies)

west

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Re: Finding Japanese Net-nets
« Reply #47 on: August 06, 2014, 01:49:45 PM »
Yeah, most of these have a < 2% ROE for the past decade, it looks like.

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 :)

writser

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Re: Finding Japanese Net-nets
« Reply #48 on: August 06, 2014, 02:05:10 PM »
I assume you don't want to share before buying into a full position? Fair enough :) . I really like your ideas so far, appreciated!
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cobafdek

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Re: Finding Japanese Net-nets
« Reply #49 on: August 06, 2014, 02:20:49 PM »
My $.02, if you're investing at a big enough discount I'm not sure the minutia in the filings matters all that much.  If you can read the essence of the filing and know that the business isn't going under then you should be fine.  I will invest in these things without reading anything beyond the financials or a few metrics.  Most investors probably think I'm crazy, and I'd agree to that, but to each his own.

Thanks, all.  This approach accords with my experience with English language 10Ks as well!

I'll revisit the question I brought up in a related thread, which is when to sell.  Assuming I will have only these essential metrics in the future, with no plans of acting like a faux owner/operator, I will sell in 3-5 years if the stock is dead-in-the water, or when it reaches NCAV, whichever comes first.  West had an interesting approach, loosely based on the magicformula yearly-turnover tactic (see the Car Mate thread).  But in general, I'm with writser, and will procrastinate when it comes to the actual time of sell-decision.

Any other approaches would be welcome to hear.
« Last Edit: August 06, 2014, 02:22:23 PM by cobafdek »