Author Topic: Japanese Basket  (Read 18470 times)

mjohn707

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Re: Japanese Basket
« Reply #20 on: March 17, 2019, 07:10:15 AM »
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
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
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Foreign Tuffett

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Re: Japanese Basket
« Reply #21 on: March 18, 2019, 07:48:59 PM »
Joban Kaihatsu (1782) is a construction contractor based in Iwaki, Japan. Pays a decent dividend, is currently generating solid operating profits, trades at a ~23% discount to NCAV, and, once you factor the investment securities it owns, trades ~39% below enterprise value. 

Hat tip to "Blue Tower Asset Management" for this idea.

Spekulatius

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Re: Japanese Basket
« Reply #22 on: March 19, 2019, 03:40:36 AM »
Are you guys buying just net - net or do you also look into traditional low PE/ “decent business at very low” price stocks as well. Most of the stocks I am looking at have a low valuation, but arn’t net nets.
Life is too short for cheap beer and wine.

Hielko

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Re: Japanese Basket
« Reply #23 on: March 19, 2019, 05:29:27 AM »
I think in Japan you should try to have both, at least that is my strategy. But something that is not just a net-net, but also has a low P/E at the same time. But if you buy something that is nicely growing at has a low P/E ratio, why not? As long as it's very cheap :)

NeverLoseMoney

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Re: Japanese Basket
« Reply #24 on: March 19, 2019, 08:13:05 AM »
Are you guys buying just net - net or do you also look into traditional low PE/ “decent business at very low” price stocks as well. Most of the stocks I am looking at have a low valuation, but arn’t net nets.
I've mostly stuck to net-nets and businesses trading at extreme discounts to book value. My problem with buying better businesses at low P/E's or free cash flow multiples is mainly the language barrier. It's very difficult to get a good picture about a micro-cap Japanese company by trying to make sense of a Japanese annual report through Google Translate or something. If you're wrong about growth, or that low P/E, your downside can be quite large. I have some profitable, dividend paying companies in my portfolio that are trading at 30%-40% of book value. I'm hesitant to buy something that's trading at say, 7x earnings and 80% of book, because I think in Japan it can easily sell off to 40% of BV if earnings disappoint. Companies can get a lot cheaper than they would typically get in the US or Europe if investors become pessimistic about its prospects.

There's some limit that these deep value stocks almost never sink through. I don't think I've ever seen a consistently profitable, dividend paying Japanese company selling below 25% of tangible book value (if you've got any, please post them below!). So I feel relatively safe buying these at 30-40% of BV and doing little analysis due to the language barrier. That doesn't mean that I'll do well of course, but I think I'm unlikely to lose.

I've also tried to coattail some activist investors. I don't think any of those positions have worked out well. There's a decent book (bit too long and boring in some spots) about activism in Japan called "Hedge Fund Activism in Japan: The Limits Of Shareholder Primacy": https://www.amazon.com/Hedge-Fund-Activism-Japan-Shareholder/dp/1107672503/. I don't think coattailing foreign activists is a good idea today either. As an example: I think one company I owned (SNT Corp. - 6319.JP) did a share offering in August, 2018 to dilute their large, activist shareholder. Perhaps I misunderstood the transaction and there is another explanation. For those who want to take a look, press releases can be found on the Japanese version of their website: http://snt.co.jp/jpn/, but not on the English version. Apparently they sold ~835k shares to "improve distribution and liquidity of their stock" (Google translate). I believe there was a "purchase limit" of 400 shares per customer. The company was already swimming in cash, of course. So I don't think much has changed in terms of the treatment of activists.

Spekulatius

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Re: Japanese Basket
« Reply #25 on: March 19, 2019, 04:56:30 PM »
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!
Life is too short for cheap beer and wine.

mjohn707

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Re: Japanese Basket
« Reply #26 on: March 19, 2019, 09:30:59 PM »
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.
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Foreign Tuffett

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Re: Japanese Basket
« Reply #27 on: March 20, 2019, 08:40:26 AM »
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

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Re: Japanese Basket
« Reply #28 on: March 20, 2019, 12:17:44 PM »
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

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Re: Japanese Basket
« Reply #29 on: March 21, 2019, 03:55:31 AM »
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