When to sell a stock?

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For many investors, dyed-in-the-wool value investors especially, buying a stock is not as simple as inputting a buy order — as in value investors need to have done their research and fundamental analysis, the company ought to have for instance some sort of moat (and be a compounder whose shares are priced reasonably if not cheaply) or be trading at a discount to x variable(s) [e.g. margin of safety via current or tangible assets; resource conversion opportunity], and one must have the capital available to establish a position. Further, how much stock does one buy at first; how much of an order will get filled for a smaller cap company? Although, once a position is established and fully-invested, it ought to be more of an auto-pilot mode in the sense of turn off the “quote machine” and let the company work for you. Continue reading

Three unreported reasons behind Japan’s declining wages

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Value investors tend not to care much about monthly wages and labor reports published by the government. That’s not to say compensation practices and levels don’t matter at a particular company one is researching. In Japan it’s just they matter for different reasons. Here’s why wages seem like they are always reported to be falling in Japan:

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Value investing in Sanrio vs the Hello Kitty premium

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Sanrio (TYO: 8136) (OTC: SNROF) shares have taken a beating the past several months and really got hammered last week — “blame” Goldman Sachs for the latter, as it appears that its post-earnings report casting undue pessimism and uncertainty on Sanrio’s business model fueled the selloff and compelled Morgan Stanley-MUFG Securities to publish a copycat note. (Sanrio’s statement emphasizing profit-focus and no plans to abandon lucrative licensing business.) Attracted to Sanrio’s high ROE, a weakening yen, and “Cool Japan” marketing in overseas markets that only solidifies the popularity and brand recognition of flagship character, Hello Kitty, I had the fortunate timing of building a position in Sanrio’s ordinary shares in Q4’12 ahead of a sizable run up in 2013. Following are some lessons learned from that profitable investment and the intraday 23% drop Sanrio’s shares suffered last Thursday.

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Simplistic Japan trade, best wishes in 2013

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Quite a rally in Japan over the past six weeks. I’m happy there’s some excitement about Japanese stocks but at the same time I’m worried the hot money and sentiment will prove truly ephemeral. Institutional investors in the U.S. are mostly one-trick ponies when it comes to Japan. I discuss this in my book. Retail investors often get burned going long iShares Japan (EWJ), not exactly their fault though with the sudden swarm of Japan pundits pitching long-Japan/short-yen, all paying obligatory homage to EWJ. For the record, EWJ is not the Nikkei (N225) and though it is a convenient proxy in conversation, it is a poor one in practice.

With that being said, Japan could remain the hot trade into 2013 but it’s worth knowing what’s going on, notably with the impact of the yen. Expectations seem to be quite high (too high!?) that inflation can be created and this will somehow right Japan’s ‘doomed’ economy. I’m doubtful of manufacturing real growth with money schemes. I also don’t believe Japan’s economy is doomed. In fact my favorite stocks are mostly domestic-demand companies. Grab a copy of my book if you haven’t already. Meantime, hope you enjoy my exclusive article at Seeking Alpha: “Real numbers and thoughts behind a weak yen and Japan’s exporters.” Best wishes in 2013!

One too many raw deals for shareowners

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I recently wrote an article published exclusively on Seeking Alpha, entitled, “Why GE’s Buyback is a Raw Deal for Shareholders.” Share repurchase programs are trumpeted out and rarely questioned.  I believe that many, but not enough, investors understand that buybacks can be largely self-serving and hardly in shareowners’ best interests. I encourage you to read the above linked story (link visible in full article view) on GE and note the fact that the impact of share buybacks when looking at shares outstanding is very dismal; stock price performance is equally unimpressive. Continue reading

Barron’s on the Nikkei’s 2012 reversal

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Barron’s Kopin Tan writes about the Nikkei’s reversal this year in the International Trader – Asia section (first half discusses Prada’s valuation) of this week’s edition. After being the best-performing market in Q1, the Nikkei has slid 16% since its peak in late March. The vicissitudes of the market should not weigh on value investors. In a phone conversation I told Tan that the rallying and retreating is a recurring theme for Japan.  I am thankful for the cheaper stocks and see excellent opportunity in domestic demand stocks, yes, the debt-ridden, deflation defatigued, and demographically doomed domestic economy. I’m being facetious of course. But as I watched fiscal year-end March earnings and the next fiscal year forecasts come in, there were more and more companies reporting and/or forecasting record earnings. The persistently strong yen is far from ideal, but take a moment and think about the fact that the majority of Japanese companies have remained profitable despite the horrible aftermath of 3/11, the severe flooding in Thailand only a few months later (manufacturing facilities impacted), and of course the ongoing uncertainty in the EU and elsewhere.

To learn all about investing in Japan (comprehensive A-Z overview of the nuts and bolts of the market and its players, as well as key idiosyncrasies and enigmas explained) including why the debt, deflation, and demographic fears are overblown, see my book, Investing in Japan. If you are currently investing in Japan by way of the iShares Japan ETF (EWJ) or another Japan-focused ETF or a mutual fund, you’ll definitely want to see how your money is actually being managed. Japan’s broadly undervalued market (0.9-times reported book value among large caps and significantly cheaper for smaller caps) and abundance of deeply undervalued  (net-nets) and very attractively valued (“GARP”) stocks  means there are multiple viable investment approaches. Don’t be misled by tunnel-visioned macro opinion jockeying at one extreme and pedantic fault-finding on the other. Shares of Unicharm (Tokyo: 8113), a leading Japanese diaper and hygiene product maker, rose four-fold last decade.

Shareowners learning the importance of corporate governance, the hard way

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The topic of corporate governance excites few, far fewer than it should, and of course much fewer than say a big (but ultimately boring) story like Facebook’s (FB) pending IPO; though even Facebook and also Google (GOOG) have some newsworthy corporate governance issues. Corporate governance is only hot when there is an Aubrey McClendon type figure making the news — Chesapeake Energy (CHK) shareowners deserve to be outraged — or when a shareowner proxy vote overcomes all odds and leaves corporate directors and management in an awkward position, think Citigroup (C) getting a “no” on its say-on-pay. Continue reading

GE’s undervaluation and poor corporate governance

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General Electric’s (GE) annual shareowner meeting is tomorrow (Weds.) in Detroit. I urge those that haven’t voted to do so as soon as possible today to ensure votes are counted. To help make readers better informed and to generate discussion, I prepared two write-ups surrounding GE’s annual meeting: (1) a review of each item for vote on its proxy, and (2) a look at why GE is undervalued. [Hyperlinks visible in full article view.] It’s unmistakable to me the market has been efficient in valuing GE shares when considering GE’s deficient corporate governance and management. Please continue reading even if you have read the above two linked articles. Continue reading

Proxy statements underrated, a critical review of GE

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I have heard from fellow value investor Jacob Wolinsky (of ValueWalk) that Paul Sonkin, manager of the Hummingbird Value hedge fund, believes proxy statements are the most underrated of statements; Wolinsky perhaps inspired by that says rather than refer to the 3 key financial statements it really should be “4.” I couldn’t agree more. As I have been doing since 2010, I prepared an in-depth review of GE’s 2012 proxy statement. It really is imperative that investors read their companies’ proxies and not only vote more often but of course vote better informed.

Furthermore, with more governance and shareowner-rights minded investors gathering at sites like the United States Proxy ExchangeMoxyVote, Proxy Democracy, as well as TheShareholderActivist, we may gain enough critical mass to do more reviews like mine of GE, and light a fire under the large institutional holders that too often vote with management. Please see my review of GE, which appears exclusively on Seeking Alpha (dot-com). The comments there show that investors do care and are voting. The future is bright with Seeking Alpha recently hitting 1 million registered readers and Moxy Vote hitting the 100,000 mark.

IIJ: cutting edge Japanese IT company at dial-up prices

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Internet Initiative Japan (IIJI) (3774) is being overlooked by the market of late after a run last year to a multi-year high. Poised for a record fiscal year (which ends in a couple weeks), no doubt 2012 – 2013 will prove to be even more impressive. See my write-up, which appears as an exclusive premium article on Seeking Alpha. Also, my just-released book, Investing in Japan, is now available on Amazon. Continue reading