Japanese stocks are having a strong year, with the Nikkei up ~16%. Some positions in my basket of Japanese stocks have seen large price swings as well. This week I’ve sold two positions in the basket. One of them is Soft99 Corp(TYO:4464), which is up 83% since publication. Back in April, the company was trading at 0.84x net current asset value and 0.41x book value. The P/E ratio was around 10x and the company had a large cash position. Revenue and profits were very stable as well.
Soft99 is now trading well above NCAV and at ~0.75x BV. I think there are probably more attractive alternatives to be found in Japan and that is why I decided to sell this position.
Another position I sold is a company that was active in the construction industry. I recently read a book in which the author called Japanese construction companies “Yakuza-infested”. I found some other articles online that seem to confirm this. That could be a reason why you find so many cheap looking construction companies when you run stock screens in Japan. I decided to just avoid any Japanese company that is directly involved in construction from now on. I do still own a few companies that supply materials to the construction sector and I think I will hold on to those.
I have bought two new positions.
One is trading at less than 8x earnings, has a large amount of excess cash, solid free cash flow and is trading at 0.6x book value. Unfortunately, there have been no share buybacks in recent history though.
The other trades at a slight discount to NCAV and 0.6x book value. The company has a very large amount of excess cash and investments and seems to be pretty stable in terms of revenue and profits. Again, capital allocation seems to be the main problem here, given the large amount of excess cash. That said, I think the downside protection is strong and the valuation is very undemanding.
I’ve updated the VIB premium post with these two new positions.
There are some other positions in the basket that have run up and which I’m still reviewing. I might also update the latest figures for the other companies in the basket if I can find the time. I will announce any other changes to the basket in this post.
Finally, I’m also working on a new VIB premium post about a UK listed company that I think is a likely takeover candidate. There are definitely some speculative elements about this investment though and many brokers don’t provide access to this stock. It is a small position in my portfolio. I hope to finish that post soon as well.