Japanese Microcaps with very low valuations

[Quickbeam]

Good afternoon,

There seems to be a lack of forum activity regarding Japanese micro-caps. I own numerous which I believe are extremely undervalued. They have the rare combination of being  very cheap, growing quality businesses that is combined with at least decent capital allocation. They companies continue to be highly overcapitalized leaving room for strong returns to shareholders. I have picked the stocks on the basis of buybacks which is a growing (thankfully) but small subset of japanese stocks. 

Fujii Sangyo Technical Wholesaler distributor, Net Net, Net cash, 6x pe, owner operator, buybacks 


Fujita Engineering  Technical Services business trading at 6x pe, virtually no enterprise value, growth and buybacks

Kawaden Co Manufacturer of Power distribution switchboards, negative EV, 5-6x normalized PE

A-one Seimitsu Collet chuck manufacturer with -neg ev, high roic, buybacks but no growth

Here are four. I own more, but I am curious to see if there are any others interested in this market.

[se2037]

Seem like good value names. So far, i have been focusing more on the growth angle with LG Display, Keyence (robotics) and Panasonic. Care to share more names please?

Sent from my SM-N910G using Tapatalk

[MarginofSafety]

Good afternoon,

There seems to be a lack of forum activity regarding Japanese micro-caps. I own numerous which I believe are extremely undervalued. They have the rare combination of being  very cheap, growing quality businesses that is combined with at least decent capital allocation. They companies continue to be highly overcapitalized leaving room for strong returns to shareholders. I have picked the stocks on the basis of buybacks which is a growing (thankfully) but small subset of japanese stocks. 

Fujii Sangyo Technical Wholesaler distributor, Net Net, Net cash, 6x pe, owner operator, buybacks 


Fujita Engineering  Technical Services business trading at 6x pe, virtually no enterprise value, growth and buybacks

Kawaden Co Manufacturer of Power distribution switchboards, negative EV, 5-6x normalized PE

A-one Seimitsu Collet chuck manufacturer with -neg ev, high roic, buybacks but no growth

Here are four. I own more, but I am curious to see if there are any others interested in this market.

Hi there, it's nice to see that there's someone out there who's also interested in Japanese micro-caps. Recently bought a few over the past few weeks but am interested to keep looking for more. Below are 4 which I've bought recently, which may be of interest to you.

Nichiwa Sangyo. Manufacturer and seller of animal feed.
Eidai Kako. Produces and sells car mats.
Nippon Antenna. Manufacturer and seller of antennas and video communication electronics. 
Charle. Wholesaler of women underwear and cosmetics.           
 
Most of them have the following characteristics:
Negative enterprise value.
Stable to slightly growing NAV and NCAV on a per share basis over the past 7yrs or so.
Positive FCF margin over the past 5yrs or so.
Trading at a discount of >30% to NCAV (ie net-nets).
Little to no debt.

I do believe a basket of cheap Japanese stocks should do quite well in the future. So good luck us!

[mslee888]

Hi, I am not familiar with Jap mkt.
For a start, can share which broker house u are using and where can we conduct more research since information is limited.
I do not think my broker house, Maybank has this facility.

Thanks

[Quickbeam]

I use Interactive Brokers, but I am based out of Europe. it should be possible to trade in JPY stocks out of Singapore.

I own a few pure net nets in Japan as well. I do try to focus on the ones that seem to understand capital allocation. Buybacks for example.
Uehara Sei Shojii
Okayama Paper Industries

Are two I own. They have significant liquid investments on the non-current asset part of their balance sheet. They have also done significant buybacks over the past years

Outside of Eidai Kako I have looked at all the other names you mentioned. They are definitely cheap, but given the cheapness of the market I can pick and choose.

My biggest positions in Japan continue to be these..

Fujii Sangyo Technical Wholesaler distributor, Net Net, Net cash, 6x pe, owner operator, buybacks
Fujita Engineering Technical Services business trading at 6x pe, virtually no enterprise value, growth and buybacks
Kawaden Co Manufacturer of Power distribution switchboards, negative EV, 5-6x normalized PE
A-one Seimitsu Collet chuck manufacturer with -neg ev, high roic, buybacks but no growth

[Quickbeam]

and In terms of research.. I translate the annual reports using google translate and do all the work myself. There is no outside help here. That makes them so attractively valued. They are the ultimate under the rock stocks.

[MarginofSafety]

If you are looking to do research on Japanese stocks, you can google for "Japanese net-nets" and read the blogs that come up to get a rough idea. I prefer to look at net-nets to limit my downside (sort of) because I'm investing on a quant basis since I don't read Japanese. When you are buying a basket full of stuff that cheap, it's less likely they will blow up in your face haha.

For research on individual stocks, I go to https://www.kaijinet.com/jpexpress/ (They have the latest FS translated into English) and http://www.jpx.co.jp/english/listing/co-...index.html (Which is I think the SGX website for Japan). Alternatively, you can choose to grab the Japan Company Handbook, which is like the Moody's Manual for Japanese companies. Please do share if there happens to be other better sources of info out there

[noob_investor]

If you are looking to do research on Japanese stocks, you can google for "Japanese net-nets" and read the blogs that come up to get a rough idea. I prefer to look at net-nets to limit my downside (sort of) because I'm investing on a quant basis since I don't read Japanese. When you are buying a basket full of stuff that cheap, it's less likely they will blow up in your face haha.

For research on individual stocks, I go to https://www.kaijinet.com/jpexpress/ (They have the latest FS translated into English) and http://www.jpx.co.jp/english/listing/co-...index.html (Which is I think the SGX website for Japan). Alternatively, you can choose to grab the Japan Company Handbook, which is like the Moody's Manual for Japanese companies. Please do share if there happens to be other better sources of info out there

Hi

Could you share what kind of quant basis are you using? What screener do you use to do the screening?
Thanks.

[MarginofSafety]

Normally I look for positive NAV and NCAV growth over a period of years, discount to NCAV, positive operating CF margin over a period of years, EV/average FCF over a period of years, div + buyback as a percentage of FCF, current ratio, D/E etc. These are most of the factors I can think of right now.

For screener, I'm using the one on FT.com.

[MarginofSafety]

Btw, for those interested, it seems like the screeners and google finance etc for some reason includes treasury shares when tabulating market cap for JP companies. So, the companies are actually more undervalued than on first glance.