Some thoughts about investing in Japan

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I recently published an exclusive article at Seeking Alpha, “Thoughts About Investing in Japan.” I like how SA has incorporated the summary bullet points atop its posts. I’m posting them below here with the original article linked in the aforementioned title. It’s not easy writing about Japanese stocks on SA when fewer and fewer Japanese ADRs trade in the U.S. (you can’t link Tokyo-listed ordinary shares on the site), let alone the matter that I’m focused on smaller caps. Have a look at the SA article and by the way, if you missed it, I launched a small/micro cap quarterly best-idea Japanese stock newsletter (Uguisu Value) in January.

Summary

  • Nomura’s latest investor survey shows Japanese individuals remain long Japan.

  • Demand for Japanese stocks seen exceeding supply.

  • Most-watched stocks include many usual suspects.

  • Thinking of Soros, Templeton, and Marks for Japan 2015-20.

  • Japanese stock idea generation.

Nomura’s individual Japanese investor survey (May 2014)

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Nomura’s (NYSE: NMR) (TYO: 8604) monthly “Individual Investor Survey” was released late last week. This is worth an investor’s time to flip through for a read on the psychology of the Japanese investor. Nomura also lists participants’ most-watched stocks (keep reading for a screen cap) and includes questions that deal with current developments (this month’s concern the consumption tax hike impact and shareholder meetings). I discussed Nomura’s survey as a resource in my book, Investing in Japan. The survey is one of a few resources that will enhance English-language access to, and understanding of, the Japanese market. Continue reading

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!

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.

No Stock Market as Undervalued and as Misunderstood as Japan

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Japanese stocks have done very well in 2012 and of course the weakening yen has increasingly more to do with the rally; deservedly so for the people of Japan. Otherwise, and unless Japanese stocks continue to do well, they could become neglected once again. Not necessarily a bad thing for value investors, and regardless of the rally to-date, valuations in Japan remain extremely compelling. Allow me to introduce my book, Investing in Japan: No stock market is as undervalued and as misunderstood as Japan, just released this month. Continue reading

Explaining Nintendo’s 10% Jump

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Shares of Nintendo (NTDOY.PK) (7974) jumped 9.8% overnight in Japan, while the broader market (the Nikkei 225) was up a far more modest 1.4%, and as the yen remained stubbornly (relatively) strong at Y76.65 against the US$. What explains this big move? The Japanese business press is at a loss for the most part. The Nikkei says it was a rebound after recent heavy selling, i.e. it was oversold, and in fact Nintendo had just hit a 52-week (and multiple year) low on Friday. That’s a reasonable explanation. However, note that FISCO is reporting the Tokyo Exchange will make a friendly takeover offer for the Osaka Exchange (this development is not new news except that the two reportedly have finally come to an agreement for a merger allowing for the friendly TOB), which fueled expectations of Nintendo being included in the Nikkei 225 Stock Average; it is currently traded on the Osaka Exchange, among the very few with such a large market cap that is. This is a situation similar to when a company is added to the S&P 500 and receives a nice bump in share price.  So a little bottom fishing and index premium boost brings reprieve to Nintendo shareholders.  I am long Nintendo and looking to add more to my position. Please see my article discussing my investment thesis on Nintendo.

Opportunity behind Nintendo’s falling stock price

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Please see my article about Nintendo (NTDOY.PK) (JP: 7974) published exclusively at Seeking Alpha, “Nintendo: Dirt Cheap Ahead of Next Growth Cycle.” Take the time to read the whole piece and note where I say, “As attractive as Nintendo’s valuation is, I would not be surprised to see its stock trade lower near-term, especially as the last analysts feel obligated to make their (belated) downgrades. Nevertheless, I’m fairly convinced history will rhyme for Nintendo, and accordingly, believe this is a buying opportunity (buy-and-hold and/or accumulate).”

Japan to be world’s 3rd largest economy is good news

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“China poised to pass Japan as world’s No. 2 economy,” reports CNN.com.  Q2 GDP figures from Japan and China show the latter exceeding the former, $1.34 trillion vs. $1.29 trillion. In 2009, it was Japan ahead for the full year, at $5.07 trillion compared to China at $4.91 trillion, according to the IMF. Given the two lost decades now in Japan, this was only a matter of time. Jesper Koll’s (veteran Japan economy expert now with JP Morgan in Tokyo) simple forecast (see quote below) represents a real and substantial opportunity for Japan. This is not a new idea or sudden realization by any means, but it is far more tangible now than ever before; it is becoming more palpable given recent developments such as the Japanese government actively courting Chinese tourists. Continue reading

Unlocking value in Japanese real estate

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Christopher Dillon, a Hong Kong-based entrepreneur, writer, and real estate investor, is the author of two books about real estate (his first covered property transactions in Hong Kong, and his latest published this May, covers Japan). Landed: The guide to buying property in Japan, is a must-read, not just for those considering buying a property in Japan, but also for individuals who are already homeowners, those who may be interested in refinancing, and there’s even something to be learned by long-term residents who are renting. In the very least, Landed is a ready-reference for the aforementioned individuals, and for investors who stand to gain from a better understanding of how real estate works in Japan. Continue reading