Japan is a favorite destination for value investors if the country's weighting in many value-focused mutual funds' portfolios indicates anything. For example, Southeastern Asset Management's Longleaf Partners International Fund had 19.5% of net assets in the country as of end-2010; it's largest country exposure for that fund's portfolio.
Indeed, while there has been a decent rebound since the initial sell-off following March 11th's earthquake, the broad Japanese indices remain below their pre-quake levels and considerable value remains out there, which seems to be widely recognized among professional and individual value investors, such as the commentary here on GuruFocus.
One striking thing though about some overseas commentary by individuals on Japanese equities is the reliance on simple stock screens as a benchmark of value.
This is understandable – the plethora of Japan net-nets are undeniably cheap, but many also tend to be small businesses run more for stakeholders rather than with a grasp of shareholder value or capital allocation in mind. Admittedly, everything has a price, so buying a basket of these may work out OK over a few years.
However, the country also has plenty of cheap businesses that are very well run – take VIC write-ups Ajis (4659). But finding these companies is harder for while they may be cheap, they often don’t screen super-cheap like the net-nets of this world, plus researching them if one doesn’t speak or read Japanese is tough.
For foreign investors looking to invest in Japan that can’t read Japanese there are a number of useful free resources they can use though to make single-stock investing in the country easier.
The websites of the local stock exchanges themselves are good starting points.
The main bourse is the Tokyo Stock Exchange, followed by the smaller and now merged Osaka & Jasdaq exchanges. (There are also a handful of regional bourses, such as Nagoya, but volumes are so small as to make them almost irrelevant for most investors.)
Tokyo Stock Exchange (English)
Osaka and Jasdaq Stock Exchange (English)
Both exchanges release plenty of data on areas such as trading volume and values, foreign buying and selling, and sector valuations (see here for OSE/Jasdaq sector valuation breakdowns).
Another great resource for single stock ideas is fund filings. In Japan, when an entity crosses the 5% ownership threshold for a publicly traded stock they must file a report with regulators within a few days, so generally one can see very quickly who is taking what position in a company.
One website that tracks this is here.
It is in Japanese only, but running it through Google translate gives decent results and one can search by stock code for who holds large positions in a company in the top right hand box. For example, by searching for Olympus (TSE 7733) one can see that Harris Associates made a filing that it crossed the 5% threshold on April 18.
Finally, there is this site, which among other sites runs simple screens for low PER, PBR, ROE and dividend yield — this is similar to the mechanical screens mentioned earlier, but rummaging around it can turn up interesting ideas. It’s Japanese only too and requires some playing around with if you can’t read it, but throwing the stuff into Google Translate will get you most of the way there.
For those looking to make single stock investments in Japan, these should be a good starting point for their search for undervalued names.
Happy hunting.
--- ENDITEM ----
Jamie Miyazaki is Chief Of Content at Shared Research.
Shared Research is a bilingual open-source research platform focused on Japanese small and mid-cap companies founded by a team of former hedge-fund, long-only and financial services professionals.
Users are free to register on the site and edit reports as part of ongoing wiki-based effort to update and improve reports or submit their own write-ups on companies.
Indeed, while there has been a decent rebound since the initial sell-off following March 11th's earthquake, the broad Japanese indices remain below their pre-quake levels and considerable value remains out there, which seems to be widely recognized among professional and individual value investors, such as the commentary here on GuruFocus.
One striking thing though about some overseas commentary by individuals on Japanese equities is the reliance on simple stock screens as a benchmark of value.
This is understandable – the plethora of Japan net-nets are undeniably cheap, but many also tend to be small businesses run more for stakeholders rather than with a grasp of shareholder value or capital allocation in mind. Admittedly, everything has a price, so buying a basket of these may work out OK over a few years.
However, the country also has plenty of cheap businesses that are very well run – take VIC write-ups Ajis (4659). But finding these companies is harder for while they may be cheap, they often don’t screen super-cheap like the net-nets of this world, plus researching them if one doesn’t speak or read Japanese is tough.
For foreign investors looking to invest in Japan that can’t read Japanese there are a number of useful free resources they can use though to make single-stock investing in the country easier.
The websites of the local stock exchanges themselves are good starting points.
The main bourse is the Tokyo Stock Exchange, followed by the smaller and now merged Osaka & Jasdaq exchanges. (There are also a handful of regional bourses, such as Nagoya, but volumes are so small as to make them almost irrelevant for most investors.)
Tokyo Stock Exchange (English)
Osaka and Jasdaq Stock Exchange (English)
Both exchanges release plenty of data on areas such as trading volume and values, foreign buying and selling, and sector valuations (see here for OSE/Jasdaq sector valuation breakdowns).
Another great resource for single stock ideas is fund filings. In Japan, when an entity crosses the 5% ownership threshold for a publicly traded stock they must file a report with regulators within a few days, so generally one can see very quickly who is taking what position in a company.
One website that tracks this is here.
It is in Japanese only, but running it through Google translate gives decent results and one can search by stock code for who holds large positions in a company in the top right hand box. For example, by searching for Olympus (TSE 7733) one can see that Harris Associates made a filing that it crossed the 5% threshold on April 18.
Finally, there is this site, which among other sites runs simple screens for low PER, PBR, ROE and dividend yield — this is similar to the mechanical screens mentioned earlier, but rummaging around it can turn up interesting ideas. It’s Japanese only too and requires some playing around with if you can’t read it, but throwing the stuff into Google Translate will get you most of the way there.
For those looking to make single stock investments in Japan, these should be a good starting point for their search for undervalued names.
Happy hunting.
--- ENDITEM ----
Jamie Miyazaki is Chief Of Content at Shared Research.
Shared Research is a bilingual open-source research platform focused on Japanese small and mid-cap companies founded by a team of former hedge-fund, long-only and financial services professionals.
Users are free to register on the site and edit reports as part of ongoing wiki-based effort to update and improve reports or submit their own write-ups on companies.
