Best Value Japanese Stocks - Buffett & Japan

[rainbowtokyo]

Mods: Can you please remove any off-topic responses to this post? I am hoping this thread can be a good resource for beginner investors; all constructive input is appreciated.

There are two schools of thought about Japanese stocks. The first is that Japan is a basket-case, with no future worth mentioning. Much has been written in other threads about how Japan can never recover from its present situation. People who subscribe to the first school can go here for inspiration about long-term investing: http://www.msnbc.msn.com/id/35729174/ns/us_news-giving

The second second school of thought is that Japanese companies are so beaten up that they represent good value. Last year, Warren Buffett visited Japan for the first time. Those who are interested can read why he came to Japan, aged 81, here: http://www.investingdaily.com/14541/...st-in-60-years

I'm interested in people who belong to the second school of thought. If you are a serious investor with "skin in the game" and have done some work on the topic, feel free to share on this thread or PM me.

Gaijin06 once posted on this topic and was skeptical of Japanese stocks. Coming from an insider who worked in the financial markets, some of his posts about Japanese stocks were scary. I wonder if the situation has changed and if attitudes to shareholders and investors have improved.

[well_bicyclically]

Mods: Can you please remove any off-topic responses to this post? I am hoping this thread can be a good resource for beginner investors; all constructive input is appreciated.

.... Last year, Warren Buffett visited Japan for the first time. ....

yes, but what did he think of the bidet toilet seats and AKB48????

[Agitator]

Gaijin06 once posted on this topic and was skeptical of Japanese stocks. Coming from an insider who worked in the financial markets, some of his posts about Japanese stocks were scary. I wonder if the situation has changed and if attitudes to shareholders and investors have improved.

I speak from professional experience here: DO NOT INVEST IN JAPANESE EQUITIES.

1. Japanese companies are not run to maximize shareholder value. (This may be a good thing or a bad thing depending on your perspective, but as a potential shareholder it is bad.)

2. Insider trading is rampant in the Japanese markets. You, the outsider and uninformed investor (with regards to the inside information) will be taken for a ride.

3. Just because the value of a stock has gone down doesn't mean it won't go down further. The Nikkei is at 1/4 of its all-time high, and at half its end of 2007 level. Sony is at all-time lows. Nomura trades at prices it hasn't seen since the early 1970s. Nintendo's bubble has burst. Construction companies have already gotten whatever tsunami-bounce could be expected. And so on.

I do not have any Japanese stocks in my portfolio with the exception of certain global funds that allocate a portion of the portfolio to Japan. If they offered worldwide-except-Japan funds, I'd buy into those instead.

Financially,
A.

[rainbowtokyo]

2. Insider trading is rampant in the Japanese markets. You, the outsider and uninformed investor (with regards to the inside information) will be taken for a ride.
.

Thank you for responding. Your post expresses similar views to Gaijin06s posts almost 2 years ago.

On the topic of legal insider buying and selling (as opposed to the illegal kind): When I visited the Tokyo Stock Exchange, I was told by one of their economists that all purchases by company insiders (eg. board members, employees etc) have to be reported electronically. Apparently, the same rules also apply to JASDAQ stocks. In this respect Japan is pretty much like other open economies. In the US there myriad websites that publish this information for US stocks. My question is this: Do you know how we can access this type of information in Japan for Japanese stocks?

[Agitator]

Thank you for responding. Your post expresses similar views to Gaijin06s posts almost 2 years ago.

On the topic of legal insider buying and selling (as opposed to the illegal kind): When I visited the Tokyo Stock Exchange, I was told by one of their economists that all purchases by company insiders (eg. board members, employees etc) have to be reported electronically. Apparently, the same rules also apply to JASDAQ stocks. In this respect Japan is pretty much like other open economies. In the US there myriad websites that publish this information for US stocks. My question is this: Do you know how we can access this type of information in Japan for Japanese stocks?

Just to clarify, the problem is not insider trading by the officers/board members/bankers - it's trading by people who get the information from those insiders.

You can get information on insider purposes from Bloomberg, Reuters, Quick, etc.

Electronically,
A.

[rainbowtokyo]

Just to clarify, the problem is not insider trading by the officers/board members/bankers - it's trading by people who get the information from those insiders.
You can get information on insider purposes from Bloomberg, Reuters, Quick, etc.

Electronically,
A.

Any of these free? In the US. one could do a Form4 search at the SEC's website. Not sure how to do the same, in English, in Japan.

[Agitator]

Any of these free? In the US. one could do a Form4 search at the SEC's website. Not sure how to do the same, in English, in Japan.

Not sure if you can get it for free through any of those - probably not, though. I think you can get the information, in Japanese, from the FSA: http://info.edinet-fsa.go.jp/, but I don't have any interest or any work-related reason to do so anymore.

Haltingly,
A.

[Tatsuo]

I speak from professional experience here: DO NOT INVEST IN JAPANESE EQUITIES.

It is always a mystery to me how people can think so much about themselves and believe that they could predict market-movements that depend on billions of variables.

A couple of years ago Japanese bonds and the Yen were seen as doomed. What happened was the opposite; although all numbers and common sense said (and say) that lending money to the country with the most debts is the wrong move.

Just take a look at the table in the middle of this page (スペシャル→騰落率). In the years between 1998 and 2008, Japanese stocks outperformed all other asset classes in 4 years.

https://www.rakuten-sec.co.jp/web/fu...D=JP90C0005YL7

For a long-term investor that doesn’t rebalance his portfolio investing in Japanese stocks was the wrong choice. But for somebody that rebalances every year or twice a year and may be even living in Japan there is no way around Japanese stocks.

There are no rules and you can’t predict which assets class will be on top next year. As over 80% of funds managers don’t beat their benchmarks and especially in mixed-asset funds the average performance is inacceptable, how should a single person without the info sources they have predict if or if not Japanese equities are going down?

In a game where the brightest minds of this planet with the best info sources and equipment can’t beat the average market there is no way a private investor can say how an asset class will develop in the next years.

The only thing you can do is build yourself a decent and cheap portfolio according to your risk appetite and set a fixed asset allocation with a safe investment as one part that can be used as a source for re-balancing.

It is very difficult for an intelligent human being to say to oneself that predicting the stock markets based on facts were impossible as you have been told otherwise your whole life. Still, all studies show that it is next to impossible for private and professional investors to beat the average market with timing and deliberate investment decisions.

I advise you to read or listen to the book “Trading for a Living” by Elder.

Investing in Japanese stocks as a part of your asset allocation is a good thing. Moving parts of your investments in Japanese stocks because you believe you could see under-value is a wrong move. You most certainly will lose money as there is no such thing as "worth more or less than market value". There is just the market price and a lot of wishful thinking how this planet with its billions of variables is going to develop in the next 10-20 years.

[rainbowtokyo]

I advise you to read or listen to the book “Trading for a Living” by Elder. .

Thanks Tatsuo. This is a classic book, written in the early 90s by Alexander Elder, a Russian doctor who defected to the USA in dramatic circumstances back in 1976. Definitely worth reading if you are interested in technical analysis and 'trading.' I have an ebook copy if anyone wants it. This book was written for traders and speculators and is full of good sense. Its only fault IMHO is that it is not suitable reading for long term investors who seek companies that increase their earnings year after year. For that I strongly recommend Peter Lynch's timeless 'One Up on Wall Street.'

More about Elder: He has not totally abandoned his day job and, to his credit, still works as a Psychiatrist in New York. As far as I know, he never made any serious money out of technical analysis and trading. I suspect he earns more 'teaching' people to trade than from trading itself. By all accounts, he is a decent and ethical fellow. http://www.elder.com/about/ Although I have a lot of respect for him, I'm more interested in stocks for the long term. The sort of stuff your grandma would buy. Buy, hold for 20 years, re-invest all dividends.

[Tatsuo]

The reason why I like his book is not so much because you could learn how to live from trading (proven to be impossible) but his opinion about how market participants overestimate their abilities and how improbable it is to win in a minus-sum-game against better equipped and informed opponents. 

Your long term approach is good but I believe it is very difficult and lucky to find companies that will definitely increase in value, whose business model can be predicted into the future and that will keep their dividends on the desired level. Buffet was right lots of times. Many thousands of people with a similar approach weren't.

I go as far and say that the only free lunch is a emotion-free, low-cost asset allocation with regular pre-decided rebalancing. At least this had been the only successful approach in the last 100 years. 

Even Buffet says that most investors would be better off if they invested in an index-funds.  

Still if you have a lucky timing and have the guts to invest in 20-30 global players in times when most people believe the world will come to an end soon(eg 2008) your plan could work.

[rainbowtokyo]

Still if you have a lucky timing and have the guts to invest in 20-30 global players in times when most people believe the world will come to an end soon(eg 2008) your plan could work.

I think it was Baron Rothschild who said that the best time to be in the market is when blood runs in the streets.

I definitely agree with some of the things you say but suggest extreme caution vis a vis 'trading.' Yes, trading can make you big money; exponential gains are possible if you put in the work and have a bit of luck on your side. But you can also lose the lot. I speak from personal experience: trading certainly changed my own life. When I was at university, I made a 66 fold gain on an options trade that I rolled over and over for around one year. That one trade changed my life and gave me life-options I would otherwise never have had. But, try as I may, I've never been able to repeat that performance. In fact, I look back on it now and it seems like a dream. These days, as i get a bit older (and having blown quite a bit of cash on trading) I want slow steady gains from boring companies that increase their earnings year after year. To be honest, trading scares the living daylights out of me. Just het same, i wish you well in your endeavors. Strongly recommend that you read Lynch's book as per my post above. I regret I do not have an ebook copy. Have you read Schwager's series of books on his conversations with traders? Definitely worth a look if trading is your thing.

[ozzijp]

I speak from personal experience: trading certainly changed my own life. When I was at university, I made a 66 fold gain on an options trade that I rolled over and over for around one year. That one trade changed my life and gave me life-options I would otherwise never have had.

Let me guess, 1999/2000? Who didn't? Crikey, you could've made that just trading straight stocks. I did. I think you have probably neglected to disclose that you lost all that. I did.

But, try as I may, I've never been able to repeat that performance.

Maybe you weren't trying hard enough. Do you often drop in at the Tokyo Stock Exchange? Can anyone do that? Is it Earl Grey or just Lipton that they serve there?

In fact, I look back on it now and it seems like a dream. These days, as i get a bit older (and having blown quite a bit of cash on trading)

You should just hang it up there RT, you seem to have the Vegas monkey on your back. Find something you love to do and run with it. FWIW, posting on GP has yet to be seen as a viable revenue generator.

[twelvedown]

Ah, the rainboy with yet more erstwhile investment advice...
I have a theory that the rainblow shows up every time it loses another 50% of it's initial investment of $400.
Let's take the pain away and have another blast on gaijinpot....

Kind of like a problem gambler stumbles away for a slots machine after losing his last dime and starts an ugly scene with the security guards...
"It waz rigged I tells ya....you..you...losers.. I'm better than you...I'll, I'll shows you next time...."

[IparryU]

Ah, the rainboy with yet more erstwhile investment advice...
I have a theory that the rainblow shows up every time it loses another 50% of it's initial investment of $400.
Let's take the pain away and have another blast on gaijinpot....

Kind of like a problem gambler stumbles away for a slots machine after losing his last dime and starts an ugly scene with the security guards...
"It waz rigged I tells ya....you..you...losers.. I'm better than you...I'll, I'll shows you next time...."

And the worst thing about it... he resorted to J-investments.

With so many investments out there... why invest in Japan? Property I would say is not a bad idea if you know what you are doing, but JGBs... at such a low they get the media-merry-go-round AKB48 to PR them? Before that it was taxi drivers... too desperate for my liking...