Alright, just finished opening my positions on the Tokyo Exchange. These are all aiming to be sized around 40-50% of a normal position. Orders on the TSE are in increments of 100 (at least through my broker), so I couldn’t size them all perfectly. I’m sizing them down and taking more based on the abundance of stocks trading cheap and the increased risk of missing something fairly obvious to deter me from one of these due to the language barrier.
The general idea for going heavy into Japan (about 2 to 2.5x their market weight if I were evenly invested in all the markets I consider investible based on market cap) is that they’re broadly undervalued for reasons that I generally understand (lots of companies with a history of poor capital use/shareholder return), and there are reforms being put in place by the government/exchanges to try to force better corporate governance. Basically anyone trading under book value is going to be pressured to increase their share price through the available mechanisms. All these companies have more than enough cash/earnings to justify higher dividends and buybacks.
The research process was pretty daunting compared to US stocks, I had to find a new screener that could run the screens I needed on foreign stocks - which took a while, then verify that its data was accurate by going into the quarterly filings on the JPX site and translating. Given the reduced position sizes and the difficulty of finding coverage, I spent a little less qualitative time on each stock. I translated their most recent quarterly filing, their most recent annual report, and their websites for additional info. Some made transcripts of earnings calls available, and I translated those. I searched for news online, but didn’t find much.
Last but not least (well, early on in the process but lower down the totem pole of importance in the process), I did a lot of research on Japanese corporate culture, the differences in how their economy works compared to ours, etc. I used AI pretty heavily on this part, and also had a phone call with a friend who’s done some business there and spent some time there. I learned some interesting things, although I’m sure there are many differences that I didn’t learn about too. I also researched the earthquake and tsunami risks, which are pretty significant relative to other places - but there’s some geographic diversification within these although obviously Tokyo is heavily represented - I think it’s four in Tokyo, two in Nagoya, and no other metro area has more than one if I recall correctly.
Anyway, here are the stocks and entry points and some brief metrics/notes on each.
3/7 (PM EST)
8935.T FJ Next Holdings ¥1,309
3321.T Mitachi Co. ¥1,208.66
9856.T Ku Holdings Co. ¥1,170
3892.T Okayama Paper Industries Co. ¥1,395
6894.T Pulstec Industrial Co. ¥1,605
3/10 (PM EST)
5971.T Kyowakogyosyo Co. ¥5,680
6382.T Trinity Industrial Corp. ¥1,109
5078.T CEL Corp. ¥3,530
1997.T Akatsuki Eazima Co. ¥1,589.50
FJ Next Holdings
P/Tan Book: 0.66
P/NCAV: 1.09
P/E: 6.78
Real estate sales and rentals, predominantly in Tokyo. Earnings growing.
Mitachi Co
P/TB: 0.69
P/NCAV: 1.83
P/E: 7.77
Semiconductor trade company. Earnings growing.
Ku Holdings Co
P/TB: 0.61
P/NCAV: 0.89
P/E: 6.06
Chain of car dealerships. Earnings have trended up over time, but they’re cyclical and may be running out of room to grow.
Okayama Paper Industries Co
P/TB: 0.56
P/NCAV: 0.93
P/E: 6.48
What it sounds like - paper, cardboard, etc. Mostly boxes and retail packaging I think. Earnings have trended up over time, but cyclical.
Pulstec Industrial Co
P/TB: 0.65
P/NCAV: 0.96
P/E: 8.81
X-ray machines, medical and industrial uses. Earnings flat but they’ve consistently turned a profit.
Kyowakogyosyo Co
P/TB: 0.52
P/NCAV: 0.73
P/E: 3.80
They make bolts for construction machinery, earnings are growing, they are a home run on the value screener. The only area they’re lacking is in shareholder returns, and the reforms should apply pressure.
Trinity Industrial Corp
P/TB: 0.60
P/NCAV: 0.82
P/E: 8.36
They manufacture and sell auto equipment/components. Toyota is a large customer. Earnings have trended up over time, but a bit cyclical.
CEL Corp
P/TB: 0.64
P/NCAV: 0.71
P/E: 12.95
They build/manufacture and sell housing and maintain rental housing around Tokyo. Earnings are growing.
Akatsuki Eazima Co
P/TB: 0.49
P/NCAV: 0.65
P/E: 7.78
They design/construct/maintain HVAC/plumbing. They’ve remained profitable consistently, though earnings don’t appear to be growing.