Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

Thematic (Sector/Industry)

<ul>
<li>Big gains in the US semi and DC related should translate into continued upside in Japan despite some BIG gains yesterday.</li>
<li>Wire and cable plays are all surging, yet the smaller side of the sector underperforms. Nidec good risk/reward into numbers.</li>
<li>HAMR rollout helping Seagate higher should also help memory/HDD component plays.</li>
</ul>


Big gains in the US semi and DC related should translate into continued upside in Japan despite some BIG gains yesterday.
Wire and cable plays are all surging, yet the smaller side of the sector underperforms. Nidec good risk/reward into numbers.
HAMR rollout helping Seagate higher should also help memory/HDD component plays.


Japan Morning Connection: AI Binge Buying Should Continue in Japan

<ul>
<li>Tech selloff overnight on NVDA post-earnings weakness was fairly contained, and SPE related in Japan should continue yesterdays rebound off the morning lows.</li>
<li>Big beat for Dell on the strong outlook for its AI servers outweighing the soft consumer PC market sending it +8% in after-market trading.</li>
<li>News that Tepco plans to spend $3.2bn to upgrade its electricity infrastructure to 2030 positive for wire/cable names and related names.</li>
</ul>


Tech selloff overnight on NVDA post-earnings weakness was fairly contained, and SPE related in Japan should continue yesterdays rebound off the morning lows.
Big beat for Dell on the strong outlook for its AI servers outweighing the soft consumer PC market sending it +8% in after-market trading.
News that Tepco plans to spend $3.2bn to upgrade its electricity infrastructure to 2030 positive for wire/cable names and related names.


Japan Morning Connection: Tech Set to Rebound as Dell After-Market Print Sets Positive Tone

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/586/original/2020-09-02_15-03-28.png?1599026640" class="editor-image img-responsive" data-smartkarma-image-id="156586"></figure>
<div class="content-caption">Source for all charts: Japan Analytics</div>
NEV IN JAPAN - Japan has a reputation for being the world's leading market for finding listed companies with negative Enterprise Value (NEV). Based on a sample of 842,133 traded months for the 3,826 currently-listed non-financial companies in our universe since 1993, NEV-traded months represent 8%. One thousand and eleven companies have spent at least one month with a negative EV and the average NEV 'period' is just over two years.  The number of NEV companies has varied over the last thirty years, from only one in 1994 (Sanyu Construction 1841 JP) to a peak of 437 in 2009 - 15.4% of the universe. In the last two years, the percentage has doubled to 10% or 366 companies, most of which are small-cap.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/590/original/2020-09-02_15-13-33.png?1599027223" class="editor-image img-responsive" data-smartkarma-image-id="156590"></figure>
50 BPS -Accordingly, the aggregate (inverted) value of NEV stocks is ¥2.5 trillion or just 50 basis points of the aggregate of the universe. Nevertheless, the current value is at the upper end of the thirty-year range. We have excluded four non-financial companies - Z Holdings, Rakuten, Japan Post, and Sony - as they have financial subsidiaries on their balance sheets.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/595/original/2020-09-02_15-36-40.png?1599028611" class="editor-image img-responsive" data-smartkarma-image-id="156595"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/866/original/2020-09-03_16-43-25.png?1599119017" class="editor-image img-responsive" data-smartkarma-image-id="156866"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/596/original/2020-09-02_15-37-56.png?1599028687" class="editor-image img-responsive" data-smartkarma-image-id="156596"></figure>
NEV 'BUYS' - Brief periods, and occasionally extended, when higher-quality companies dip into NEV are often good long-term buying opportunities as shown above with <a href="https://www.smartkarma.com/entities/temp-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1428:1" rel="noopener">Persol (2181 JP)</a>, <a href="https://www.smartkarma.com/entities/toei-animation-co-ltd" target="_blank" data-smartkarma-citation="entities:18641:1" rel="noopener">Toei Animation (4816 JP)</a>  and <a href="https://www.smartkarma.com/entities/hakuhodo-dy-holdings-inc" target="_blank" data-smartkarma-citation="entities:8736:1" rel="noopener">Hakuhodo DY (2433 JP)</a>. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/623/original/2020-09-02_17-57-38.png?1599037069" class="editor-image img-responsive" data-smartkarma-image-id="156623"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/625/original/2020-09-02_18-04-05.png?1599037457" class="editor-image img-responsive" data-smartkarma-image-id="156625"></figure>
NEV 'TRAPS' - Conversely, NEV can persist for years, 'trapping' both value investors and activists, particularly where management remain 'cloth-eared' such as <a href="https://www.smartkarma.com/entities/tokyo-broadcasting-system" target="_blank" data-smartkarma-citation="entities:12981:1" rel="noopener">Tokyo Broadcasting System (9401 JP)</a> and <a href="https://www.smartkarma.com/entities/toppan-printing-co-ltd" target="_blank" data-smartkarma-citation="entities:11875:1" rel="noopener">Toppan Printing (7911 JP).</a>
<div class="content-highlight">
In the DETAIL section below, we will review the current large-cap NEV companies, as well the most persistent and the largest peak to trough NEV ranges and make some specific stock recommendations.
</div>


Source for all charts: Japan Analytics
NEV IN JAPAN - Japan has a reputation for being the world's leading market for finding listed companies with negative Enterprise Value (NEV). Based on a sample of 842,133 traded months for the 3,826 currently-listed non-financial companies in our universe since 1993, NEV-traded months represent 8%. One thousand and eleven companies have spent at least one month with a negative EV and the average NEV 'period' is just over two years.  The number of NEV companies has varied over the last thirty years, from only one in 1994 (Sanyu Construction 1841 JP) to a peak of 437 in 2009 - 15.4% of the universe. In the last two years, the percentage has doubled to 10% or 366 companies, most of which are small-cap.

50 BPS -Accordingly, the aggregate (inverted) value of NEV stocks is ¥2.5 trillion or just 50 basis points of the aggregate of the universe. Nevertheless, the current value is at the upper end of the thirty-year range. We have excluded four non-financial companies - Z Holdings, Rakuten, Japan Post, and Sony - as they have financial subsidiaries on their balance sheets.



NEV 'BUYS' - Brief periods, and occasionally extended, when higher-quality companies dip into NEV are often good long-term buying opportunities as shown above with Persol (2181 JP), Toei Animation (4816 JP)  and Hakuhodo DY (2433 JP). 


NEV 'TRAPS' - Conversely, NEV can persist for years, 'trapping' both value investors and activists, particularly where management remain 'cloth-eared' such as Tokyo Broadcasting System (9401 JP) and Toppan Printing (7911 JP).

In the DETAIL section below, we will review the current large-cap NEV companies, as well the most persistent and the largest peak to trough NEV ranges and make some specific stock recommendations.


🇯🇵 JAPAN • Looking for Value in Negative Enterprise Value

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

TSE Tokyo Price Index TOPIX / Technical Analysis

In this report we highlight attractive and actionable themes within developed int’l markets: Technology and Industrials continue to be two of the most attractive Sectors globally -- overweight. These two Sectors account for half of today’s individual recommendations Countries that are (1) developing positively in terms of price and RS and (2) have significant representation in this report include: Japan (TOPIX), Switzerland (SMI), and France (CAC 40).Outside of the above themes, a bottoms-up approach is required to uncover attractive and actionable stocks. On page 4 we include a table of all stocks highlighted in this report.

In this report we highlight attractive and actionable themes within developed int’l markets: Technology and Industrials continue to be two of the most attractive Sectors globally -- overweight. These two Sectors account for half of today’s individual recommendations Countries that are (1) developing positively in terms of price and RS and (2) have significant representation in this report include: Japan (TOPIX), Switzerland (SMI), and France (CAC 40).Outside of the above themes, a bottoms-up approach is required to uncover attractive and actionable stocks. On page 4 we include a table of all stocks highlighted in this report. 

Overweight Global Technology & Industrials

In our October International Strategy, we outline important technical levels across markets and highlight various themes which lead to our neutral outlook, along with areas of the market where we see actionable opportunities, including Japan, and global technology.

In our October International Strategy, we outline important technical levels across markets and highlight various themes which lead to our neutral outlook, along with areas of the market where we see actionable opportunities, including Japan, and global technology.

Global Equity Strategy: Neutral Outlook Intact, Japan and Global Tech Are Bright Spots.

Japan

CHUDENKO CORPORATION constructs electrical facilities for power distribution lines, air-conditioning, and indoor electrical wiring.  The Company also constructs sewage facilities, disaster prevention systems, and communication infrastructure such as optical fiber network.  Chudenko, through its subsidiary, sells electrical equipment.

Price Gauge
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Chudenko Corp (1941 JP)

Japan Morning Connection: AI Binge Buying Should Continue in Japan

US gains in semiconductor and DC related should drive continued upside in Japan. Surges in wire and cable plays. HAMR rollout should boost memory...

Andrew Jackson

Japan Morning Connection: Tech Set to Rebound as Dell After-Market Print Sets Positive Tone

Tech selloff contained, Dell beats with strong outlook for AI servers, Tepco's $3.2bn upgrade plan positive for wire/cable names.

Andrew Jackson

🇯🇵 JAPAN • Looking for Value in Negative Enterprise Value

NEV IN JAPAN - Japan has a reputation for being the world's leading market for finding listed companies with negative Enterprise Value (NEV)....

Campbell Gunn

Overweight Global Technology & Industrials

In this report we highlight attractive and actionable themes within developed int’l markets: Technology and Industrials continue to be two of the...

Vermilion Research

Global Equity Strategy: Neutral Outlook Intact, Japan and Global Tech Are Bright Spots.

In our October International Strategy, we outline important technical levels across markets and highlight various themes which lead to our neutral...

Vermilion Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japan Morning Connection: AI Binge Buying Should Continue in Japan

US gains in semiconductor and DC related should drive continued upside in Japan. Surges in wire and cable plays. HAMR rollout should boost memory...

Andrew Jackson

Japan Morning Connection: Tech Set to Rebound as Dell After-Market Print Sets Positive Tone

​Tech selloff contained, Dell beats with strong outlook for AI servers, Tepco's $3.2bn upgrade plan positive for wire/cable names.

Andrew Jackson

🇯🇵 JAPAN • Looking for Value in Negative Enterprise Value

NEV IN JAPAN - Japan has a reputation for being the world's leading market for finding listed companies with negative Enterprise Value (NEV)....

Campbell Gunn

Overweight Global Technology & Industrials

In this report we highlight attractive and actionable themes within developed int’l markets: Technology and Industrials continue to be two of the...

Vermilion Research

Global Equity Strategy: Neutral Outlook Intact, Japan and Global Tech Are Bright Spots.

In our October International Strategy, we outline important technical levels across markets and highlight various themes which lead to our neutral...

Vermilion Research

Tech selloff contained, Dell beats with strong outlook for AI servers, Tepco's $3.2bn upgrade plan positive for wire/cable names.