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Geoff Gannon
Geoff Gannon

Special Report: 15 Japanese Net-Nets

March 28, 2011
Warren Buffett’s teacher, Ben Graham, liked to diversify across lots of obviously cheap stocks. The easiest years of stock picking for Ben Graham were the 1930s and 1940s.

Japanese stocks of 2011 look a lot like American stocks of the 1930s and 1940s. The stocks have underperformed for years. The economy has underperformed for years. There are no clear catalysts. The big picture looks hopeless. But the prices are right.

These are Ben Graham bargains.

This report was prepared on March 21st, 2011. It was prepared using stock prices as of March 21st, 2011.

The report focuses on 15 Japanese net-nets. A net-net is a stock selling for less than the value of its current assets – cash, receivables, and inventory – minus all liabilities. Basically, it’s a stock selling for less than its liquidation value.

In true Ben Graham fashion, all 15 of these Japanese net-nets are small, obscure stocks. They are not well known inside Japan. And they are completely unknown outside Japan. None of these stocks trade in the United States. There are no ADRs for these shares.

If you want to buy these stocks, you need to get your broker to place trades in Japanese Yen on Japanese stock exchanges. If you don’t know how to do that – or you’ve never done that before – you’ll want to check with your broker before buying this report.

Like a lot of Ben Graham bargains, these are also small stocks. These 15 Japanese net-nets range in size from a market cap of about $30 million U.S. to about $120 million U.S.

If you don’t know how to buy stocks that small – or you’ve never done that before – you’ll want to check with your broker before buying this report. The key concept you need to understand is a “limit” order. You should never place “market” orders for any of these stocks.

You can not tell your broker simply to buy these stocks. You absolutely must name the price you are willing to pay.

To recap, this report is a very useful list of 15 of Japan’s best Ben Graham bargains.

However, this report is only useful for some investors. You need to know how to buy stocks in Japan – or have a broker who can help you do this – and you need to know how to buy small, illiquid stocks.

Obviously, you will also need to convert your home currency – such as U.S. dollars – into Japanese Yen to buy these stocks. All of these stocks are only available for purchase in Japan using Japanese Yen.

That’s a lot to ask.

But for those investors who feel comfortable buying small, illiquid Japanese stocks – this is a great opportunity.

The report lists 15 Japanese net-nets. All 15 of these Japanese net-nets are higher quality businesses than virtually all of the net-nets currently available in the United States.

These 15 Japanese net-nets are profitable. Many have been consistently profitable for the last 10 years. For patient value investors who can buy and hold small, illiquid Japanese stocks – these are true Ben Graham bargains.

But it’s very important that you understand what it takes to profit from the information in this report. Individual investors who have never bought a stock on a foreign country’s stock exchange should think long and hard before buying this report.

It takes a little extra work on your part just to track these stocks down and get your broker to buy them.

Make sure you’re willing to do that work before you buy this report.

If not, you can always check out GuruFocus' Ben Graham Net-Net Screener and the Monthly Net-Net Newsletter.

This is the link for download the special report:


About the author:

Geoff Gannon
Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

Rating: 4.4/5 (18 votes)


Liarspoker - 6 years ago    Report SPAM

Thanks Geoff.

The 15 company's look interesting. However I am having real trouble finding and researching my usual criteria for net net investing. These criteria include director pay/otions/warrants, director holdings, major shareholders etc ( basically reading the Directors Report ) as well as reading the notes to the balance sheet. I am quite prepared to buy Japanese net nets and have enquired if my broker can do it ( which he can, there's a larger commission though ). However I am not sure if I will invest in those shares if I can't find the info listed above.

How do you find that sort of information Geoff ?
Yswolinsky - 6 years ago    Report SPAM
Geoff great job, just a quick question, I see you did not assign a liquidation value to either the receivables or the inventory. I presume most of these stocks would be trading above NCAV if a fire sale liquidation value was placed on the inventory. Can you add any color to this?

Yswolinsky - 6 years ago    Report SPAM
Or at least, at less of a discount to NCAV
Liarspoker - 6 years ago    Report SPAM

I have an order in for shares in two of the companies mentioned for tonights session albeit at prices lower than todays close.. I also have a request in with a Japanese speaking friend to translate some of the accounts and notes of other companies. I'll be looking to add perhaps two more companies if the prices fall more.

It's interesting to note Jacob that many of these companies have very large cash balances as well as marketable securities. Not only that but often marketable securities are held under fixed assets as well ( a different accounting system maybe ) ? The companies would obviously trade at a lower discount to NCAV if you discount inventory and receivables but if you look at the details of share number four then you know that is a company that won't be sold in a fire sale as plenty of suitors should be available. Also notice the cash build up over the last few years. 2007 = 3.6b, 2008 = 4.2bn, 2009 = 5bn & 2010 = 6.4m. Ok so receivables and investments have dropped a little over the period from memory ) but surely a divi paying company with no debt with that sort of cash generation is worth more than NWC ?

I'm looking forward to doing more digging as time permits.
NiallF - 6 years ago    Report SPAM
Hi - I read the report on these 15 Japanese net nets. However, can you send through a list of the JPY market prices for each of these 15 stocks when the analysis was done. The prices were not in the report. Knowing that will make it easier to reference how much the market has moved since the analysis was done.


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