Just a quick update on my Japanese holdings. I’ve sold Kikusui Electronics (TYO:6912). The share price has jumped higher over the last couple of weeks. I’ve not been able to find a reason for this rise. Perhaps some traders have become interested in the stock, given its “strong momentum” or something, I don’t know.
Whatever the reason, Kikusui is now trading at a market cap of ¥8.8bn (note: there are 8.36 million shares outstanding. Google Finance’s data is wrong.) The company is now trading at its last reported book value. Kikusui was probably one of the ugly ducklings in the basket and was bought mostly for its book value discount and consistency of earnings. Now that the company is selling for book value and with the company producing a small loss in its latest quarter, I see no reason to hold on to the shares at this price. I think this is the time to sell.
Unfortunately for me, I sold in the low 800’s and the shares have continued to rise since then. But it’s impossible to consistently sell at the top of course, so even saying “unfortunately” is a bit silly. The same thing happened to Fujimak after I sold in March, with the stock rising another 50% in short order. Daiken’s stock (TYO:5900) on the other hand, quickly came back down again after my sale.
I also decided to sell Okayama Paper (TYO:3892). This was a tougher decision, because the company is still deep in net-net territory and there has been a bit of noise from an activist as well. The main reason I sold is that the company has produced another loss in its most recent quarter. Since I started investing in Japan, I’ve stuck to profitable companies and have generally opted for consistency with regards to earnings and cash flow. Okayama Paper has started to slip a bit in recent years, with revenue dropping slightly and the company now producing small losses. Given the relatively large pool of attractive companies to choose from in Japan, I think it makes sense to move on if a company in the basket seems to be struggling. I think the main way to win with Okayama Paper is when major holder Oji Holdings (TYO:3861) would decide to buy the rest of the company. There has been a bit of a trend in Japan of large companies buying the smaller companies in which they already hold a substantial position. That could be a valid reason for holding on to Okayama Paper a while longer.
The final sell is Car Mate (TYO:7297). This was a very small position and I already announced in the latest update that I’d probably be selling this position.
I’ve bought two new positions. One position was discussed before on the blog and still looks very cheap to me. The second is a company that is trading at ~60% of book value and ~6x earnings. I’ve updated the VIB premium post that shows all my current holdings in Japan to reflect these latest buys and sells. I’ve not updated all the financial information for the legacy positions though, so keep that in mind. If you’ve previously used credits to access that page, you should be able to see the updated page without having to use any extra credits.
Disclosure: no position in Kikusui Electronics, Okayama Paper, Car Mate, Fujimak, Daiken and Oji Holdings.
I just looked up Kikusui on a Japanese forum. Saw lots of comments about the company riding the Electric Vehicle wave. I’d guess the same as you – traders chasing after strong momo.
Nice blog you got here! 🙂
Thanks Clay. That makes sense, especially looking at the trading volume today: 2.85m shares when there are just 8.4m shares outstanding. Lots of people probably buying and selling on the same day. I saw the same thing happen with Daiken (5900) when some buzz appeared in some articles that drove the stock up. It’s never a great feeling to see a stock I’ve just sold go up another ~24% overnight, but this sort of price action is just crazy.
A Misaki Investments report from 2016 showed that 90+% of Japanese institutional investors have holding periods less than 1 year. For US institutional investors, same figure is closer to 65%. I wrote about this a while back on Seeking Alpha if you’re interested:
https://seekingalpha.com/article/4062792-patience-might-pay-japan
Visit Yahoo Japan Finance – you’d be amazed at the number of candle charts they have. Loaded with technical stuff.
Anyway, good to know that the buzz is helping you with your long term investments 🙂
Cheers,
Clay
Interesting follow up on Okayama. Curious where you get any fundamental data on the Japanese companies you look at? I have a half dozen or so on my watchlist but haven’t been able to get much meaty info going back more than 3 or so years, unless I go to the annual reports (I don’t know Japanese but am teaching myself – more for fun than investing but if I could read the native Japanese that would be neat)
Hi Wealth From Thirty
GuruFocus’ Asia subscription ($399/yr) has 30 year financials. I will shamelessly leave my Guru author profile with an affiliate link here! 🙂
https://www.gurufocus.com/ic/space.php?do=article&view=me&affid=408295
I believe Guru gets their historical financial data from Morningstar and then adds other metrics to it (like Greenblatt ROIC).
Also, I’m a native Japanese speaker and exclusively cover Japanese stocks in English on my own site, Seeking Alpha, and Guru Focus in case you’re interested!
Cheers,
Clay
Thanks for this Clay, I’ll have to check it out 🙂
I mainly use FT.com and KaijiNet: https://www.kaijinet.com/jpExpress/default.aspx
I don’t dig deep into these companies. In the past I have tried translating some annual reports, but I didn’t think it added much. It consumes a lot of time and in the end I still had only limited understanding about what the report said. I’d never be able to learn enough about a Japanese company with Japanese annual reports to make me comfortable enough to make it a 5%+ position. For me the basket approach is the way to go. I do like to spend some time on screening and searching for the companies that look most attractive to me.