'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.

Thematic (Sector/Industry)

<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/948/original/2020-11-08_12-52-02.png?1604807697" class="editor-image img-responsive" data-smartkarma-image-id="169948"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></section><p><strong>AUTOS ▲</strong> - Positive results and full-year upward revisions from <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota (7203 JP)</a> and <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda (7267 JP)</a> have confirmed that Japan's overall revenue and earnings momentum has bottomed and is now in an uptrend.  Although <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan (7201 JP)</a> has yet to report, the auto assembler Peer Group's Forecast/Revision Score is at a five-year high following its largest-ever single-quarter increase. </p></section><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/950/original/2020-11-08_13-11-05.png?1604808678" class="editor-image img-responsive" data-smartkarma-image-id="169950"></figure></section><p><strong>MARKET ▲</strong> - Since bottoming in mid-September, the  Results Score has gained 147 basis points, and the Forecast/Revision Score has rallied 509 bps. Total Market Value ex REITs has rallied to a new post-COVID high of ¥661 trillion but remains 12.6% below the 2017 peak. In TOPIX terms, the 'gap to peak' is 15.3%.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/951/original/2020-11-08_14-37-14.png?1604813847" class="editor-image img-responsive" data-smartkarma-image-id="169951"></figure></section><p><strong>SECTORS</strong> -  The <strong>Auto</strong> Sector joins the <strong>Machinery</strong>,<strong> Electrical Equipment</strong> Sectors as the top-three gainers. Only six Sectors have seen a decline in Score, led by <strong>Other Commercial Products</strong>, <strong>Information Technology</strong> and<strong> Non-Bank Finance</strong>.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/952/original/2020-11-08_14-45-33.png?1604814353" class="editor-image img-responsive" data-smartkarma-image-id="169952"></figure></section><p><strong>MULTIPLES</strong> - The uptick in forecast all0market Net Income has capped the market's forward multiple at 34 times and reduced the 'gap' to trailing earnings to ¥1.3 trillion.  </p>
<div><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p></div>
<div><p>Our 'best' and 'worst' pairing from Friday's announcements is <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda (7267 JP)</a> and <a href="https://www.smartkarma.com/entities/square-enix-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15003:1" rel="noopener">Square Enix (9684 JP)</a> </p></div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/953/original/2020-11-08_14-54-54.png?1604814911" class="editor-image img-responsive" data-smartkarma-image-id="169953"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/954/original/2020-11-08_15-05-04.png?1604815536" class="editor-image img-responsive" data-smartkarma-image-id="169954"></figure></section><div>
<hr>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
</div>
<div><p>Results are evenly split between positive and neutral; however, TTM revenues are still falling by 3%, and operating margins are on average 1.6 points lower. 50% of annual revisions are negative, but the average change in score has improved to a decline of 1.4 points.</p></div>
<hr>
<div><p style="text-align: center;"><strong>377 Quarterly Results</strong></p></div>
<div><ul style="list-style-type: disc;">
<li><p><strong>Results Score:</strong> 41% Positive / 8% Neutral / 51% Negative</p></li>
<li><p><strong>Average Results Score Change:</strong> -1.4 points</p></li>
<li><p><strong>Average % Change in Revenue:</strong> -6.1% Quarter YoY / -3.3% Rolling TTM YoY </p></li>
<li><p><strong>Average Operating Profit Margin Change:</strong> -1.6ppt</p></li>
<li><p><strong>Percentage Making Quarterly Losses:</strong> 21%</p></li>
</ul></div>
<hr>
<div><p style="text-align: center;"><strong>167 Annual • 22 Interim Forecasts/Revisions</strong></p></div>
<div><ul style="list-style-type: disc;">
<li><p><strong>Annual Forecast/Revision Score:</strong> 40% Positive / 10% Neutral / 50% Negative</p></li>
<li><p><strong>Interim Forecast/Revision Score Change:</strong> 68% Positive / 9% Neutral / 23% Negative</p></li>
<li><p><strong>Average Forecast/Revision Score Change:</strong> -1.4 points</p></li>
</ul></div></section>

Source for all charts &amp; tables: Japan AnalyticsAUTOS ▲ - Positive results and full-year upward revisions from Toyota (7203 JP) and Honda (7267 JP) have confirmed that Japan's overall revenue and earnings momentum has bottomed and is now in an uptrend.  Although Nissan (7201 JP) has yet to report, the auto assembler Peer Group's Forecast/Revision Score is at a five-year high following its largest-ever single-quarter increase. MARKET ▲ - Since bottoming in mid-September, the  Results Score has gained 147 basis points, and the Forecast/Revision Score has rallied 509 bps. Total Market Value ex REITs has rallied to a new post-COVID high of ¥661 trillion but remains 12.6% below the 2017 peak. In TOPIX terms, the 'gap to peak' is 15.3%.
SECTORS -  The Auto Sector joins the Machinery, Electrical Equipment Sectors as the top-three gainers. Only six Sectors have seen a decline in Score, led by Other Commercial Products, Information Technology and Non-Bank Finance.
MULTIPLES - The uptick in forecast all0market Net Income has capped the market's forward multiple at 34 times and reduced the 'gap' to trailing earnings to ¥1.3 trillion.  
• BEST &amp; WORST •
Our 'best' and 'worst' pairing from Friday's announcements is Honda (7267 JP) and Square Enix (9684 JP) 


DAILY STATS

Results are evenly split between positive and neutral; however, TTM revenues are still falling by 3%, and operating margins are on average 1.6 points lower. 50% of annual revisions are negative, but the average change in score has improved to a decline of 1.4 points.

377 Quarterly Results

Results Score: 41% Positive / 8% Neutral / 51% Negative
Average Results Score Change: -1.4 points
Average % Change in Revenue: -6.1% Quarter YoY / -3.3% Rolling TTM YoY 
Average Operating Profit Margin Change: -1.6ppt
Percentage Making Quarterly Losses: 21%


167 Annual • 22 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 40% Positive / 10% Neutral / 50% Negative
Interim Forecast/Revision Score Change: 68% Positive / 9% Neutral / 23% Negative
Average Forecast/Revision Score Change: -1.4 points


🇯🇵 JAPAN • Results & Revisions 11/06 - Autos Lead the Way

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/496/original/2020-06-30_14-16-44.png?1593494217" class="editor-image img-responsive" data-smartkarma-image-id="143496"></figure>
<div class="content-caption">Source • Japan Analytics</div>
<p><strong>THE CASH CONVERSION CYCLE</strong> - Net Working Capital is a measure of how efficiently a company manages its short-term assets and liabilities to generate cash and is also known as the Cash Conversion Cycle. In practice, Net Working Capital is scaled by the number of days of Revenue or Cost of Goods Sold that are 'tied' up in three components - Receivables, Inventory, and Payables.</p>
<p><strong>Net Working Capital Days</strong> varies by industry and the lower the number, the better. Amounts over 210 days are excessive, and a sign of business stress.  Net Working Capital is defined as:-</p>
<ul>
<li>
<strong>+ Receivables/Revenue </strong>- the average number of days required to collect on sales. Businesses usually extend a degree of credit to non-cash customers.  Receivables Days over 100 are excessive.</li>
<li>
<strong>+ Inventory/Cost of Goods Sold -</strong> the average number of days it takes to sell out of Inventory. Amounts vary widely by industry but days over 210 are excessive.</li>
<li>- <strong>Payables/Cost of Goods Sold -</strong>the average number of days the company takes to settle transactions with suppliers. By extending nominally interest-free credit, suppliers provide operating leverage to a business. A larger negative number is better, but days less than -100 are excessive.</li>
</ul>
<p>The relationship between Receivables and Payables should also be considered particularly where the company is giving more generous credit terms to its customers than it receives from its suppliers. The Cash Conversion Cycle for the aggregate of all non-financial currently-listed Japanese companies has averaged 77 days over the last thirty years. However, over the previous twelve months., a fourteen-day rise in Inventory Days during the last four years has pushed Net Working Capital Days to 93.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/529/original/2020-06-30_15-09-41.png?1593497395" class="editor-image img-responsive" data-smartkarma-image-id="143529"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/143/530/original/2020-06-30_15-10-32.png?1593497471" class="editor-image img-responsive" data-smartkarma-image-id="143530"></figure>
<div class="content-caption">Source • Japan Analytics</div>
<div class="content-caption"></div>
<p><strong>NET WORKING CAPITAL DAYS AS A STRESS TEST</strong> - The correlation between Net Working Capital Days and relative performance varies by company and by Sectors. The examples above show how signals can be heeded -  <a href="https://www.smartkarma.com/entities/nikon-corp" target="_blank" data-smartkarma-citation="entities:7117:1" rel="noopener">Nikon (7731 JP)</a>, or ignored - <a href="https://www.smartkarma.com/entities/smc-corp" target="_blank" data-smartkarma-citation="entities:20866:1" rel="noopener">SMC (6273 JP)</a> since 2018. (For more on SMC working capital issues, please see my colleague <a href="https://www.smartkarma.com/profiles/scott-foster" target="_blank" data-smartkarma-citation="accounts:1134" rel="noopener">Scott Foster</a>'s Insight of last year - <a href="https://www.smartkarma.com/insights/smc-6273-jp-getting-in-line-with-reality" target="_blank" data-smartkarma-citation="insights:30081" rel="noopener">SMC (6273 JP): Getting in Line with Reality</a>).   </p>
<p>For this Insight, we have limited our review to larger capitalisation manufacturing companies. In the<strong> DETAIL</strong> section below, we shall cover the outliers at both ends of <strong>Receivables Days</strong>, <strong>Inventory Days</strong>, <strong>Payables Days</strong>, and finally <strong>Net Working Capital Days</strong>.</p>


Source • Japan Analytics
THE CASH CONVERSION CYCLE - Net Working Capital is a measure of how efficiently a company manages its short-term assets and liabilities to generate cash and is also known as the Cash Conversion Cycle. In practice, Net Working Capital is scaled by the number of days of Revenue or Cost of Goods Sold that are 'tied' up in three components - Receivables, Inventory, and Payables.
Net Working Capital Days varies by industry and the lower the number, the better. Amounts over 210 days are excessive, and a sign of business stress.  Net Working Capital is defined as:-


+ Receivables/Revenue - the average number of days required to collect on sales. Businesses usually extend a degree of credit to non-cash customers.  Receivables Days over 100 are excessive.

+ Inventory/Cost of Goods Sold - the average number of days it takes to sell out of Inventory. Amounts vary widely by industry but days over 210 are excessive.
- Payables/Cost of Goods Sold -the average number of days the company takes to settle transactions with suppliers. By extending nominally interest-free credit, suppliers provide operating leverage to a business. A larger negative number is better, but days less than -100 are excessive.

The relationship between Receivables and Payables should also be considered particularly where the company is giving more generous credit terms to its customers than it receives from its suppliers. The Cash Conversion Cycle for the aggregate of all non-financial currently-listed Japanese companies has averaged 77 days over the last thirty years. However, over the previous twelve months., a fourteen-day rise in Inventory Days during the last four years has pushed Net Working Capital Days to 93.


Source • Japan Analytics

NET WORKING CAPITAL DAYS AS A STRESS TEST - The correlation between Net Working Capital Days and relative performance varies by company and by Sectors. The examples above show how signals can be heeded -  Nikon (7731 JP), or ignored - SMC (6273 JP) since 2018. (For more on SMC working capital issues, please see my colleague Scott Foster's Insight of last year - SMC (6273 JP): Getting in Line with Reality).   
For this Insight, we have limited our review to larger capitalisation manufacturing companies. In the DETAIL section below, we shall cover the outliers at both ends of Receivables Days, Inventory Days, Payables Days, and finally Net Working Capital Days.

🇯🇵 JAPAN • Stress Tests Part 5: Net Working Capital Outliers

<p><strong>FROM OPERATING TO FINANCING CASH FLOWS</strong> -  Having examined Operating Cash Flow in our previous <a href="https://www.smartkarma.com/insights/japan-stress-tests-part-2-operating-cash-flow-accruals" target="_blank" data-smartkarma-citation="insights:40321" rel="noopener">Insight</a>, we shall look into the 'stressors' between Operating Cash Flow and Financing Cash Flow. In our reformulated Cash Flow Statements, cash flows relating to operating activities are divided into Operating Cash Flows and Investing Cash Flows, which comprise Fixed Asset and Inventory Cash Flows.  Free Cash Flow is the sum of Operating Cash Flow, Fixed Asset Cash Flow and Inventory Cash Flow. Inventories are not included in Operating Cash Flow as they are considered discretionary, are often related to Fixed asset Cash Flows, and can be highly seasonal.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/141/225/original/2020-06-21_08-34-07.png?1592698079" class="editor-image img-responsive" data-smartkarma-image-id="141225"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>JAPAN WAS FCF POSITIVE IN Q4..</strong> - Despite the decline in Operating Cash Flow in the last quarter (the final quarter of the Fiscal Year for most Japanese companies), Investing Cash Flow was more positive than in any quarter since FY2016-Q4, which also coincided with the last business cycle low. As a result, the aggregate Free Cash Flow for the 3,639 listed non-financial companies (excluding<a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener"> Rakuten (4755 JP)</a>, <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP)</a>, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>) was an impressive ¥8.4 trillion or an annualised yield of 6.4%.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/141/223/original/2020-06-21_08-51-12.png?1592697088" class="editor-image img-responsive" data-smartkarma-image-id="141223"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>..AS CAPEX WAS PUT ON HOLD</strong> - Seasonally Japanese companies capital expenditures are higher in the second half of the fiscal year- in FY2019, ¥21trillion was added to Operating Assets. In contrast, FY2020 saw a 79% decline in capex to ¥4.4 trillion, all of which was spent in the third quarter. This decline is the most substantial second-half quarter-on-quarter contraction in fixed asset outflows since 2009.   </p><p>In the <strong>DETAIL</strong> below, we shall highlight those 'outlier' large-cap companies which are either end of the capex, inventory and Free Cash Flow tables, and focus on those with the greatest intimations of business 'stress'. We have excluded the Real Estate Sector from this analysis due to the inherent volatility of fixed assets and inventory cash flows fo these companies.</p>

FROM OPERATING TO FINANCING CASH FLOWS -  Having examined Operating Cash Flow in our previous Insight, we shall look into the 'stressors' between Operating Cash Flow and Financing Cash Flow. In our reformulated Cash Flow Statements, cash flows relating to operating activities are divided into Operating Cash Flows and Investing Cash Flows, which comprise Fixed Asset and Inventory Cash Flows.  Free Cash Flow is the sum of Operating Cash Flow, Fixed Asset Cash Flow and Inventory Cash Flow. Inventories are not included in Operating Cash Flow as they are considered discretionary, are often related to Fixed asset Cash Flows, and can be highly seasonal.Source: Japan AnalyticsJAPAN WAS FCF POSITIVE IN Q4.. - Despite the decline in Operating Cash Flow in the last quarter (the final quarter of the Fiscal Year for most Japanese companies), Investing Cash Flow was more positive than in any quarter since FY2016-Q4, which also coincided with the last business cycle low. As a result, the aggregate Free Cash Flow for the 3,639 listed non-financial companies (excluding Rakuten (4755 JP), Z Holdings (4689 JP), Japan Post (6178 JP), Softbank Group (9984 JP) and Sony (6758 JP)) was an impressive ¥8.4 trillion or an annualised yield of 6.4%.Source: Japan Analytics..AS CAPEX WAS PUT ON HOLD - Seasonally Japanese companies capital expenditures are higher in the second half of the fiscal year- in FY2019, ¥21trillion was added to Operating Assets. In contrast, FY2020 saw a 79% decline in capex to ¥4.4 trillion, all of which was spent in the third quarter. This decline is the most substantial second-half quarter-on-quarter contraction in fixed asset outflows since 2009.   In the DETAIL below, we shall highlight those 'outlier' large-cap companies which are either end of the capex, inventory and Free Cash Flow tables, and focus on those with the greatest intimations of business 'stress'. We have excluded the Real Estate Sector from this analysis due to the inherent volatility of fixed assets and inventory cash flows fo these companies.

🇯🇵 JAPAN - Stress Tests Part 3 - Inventory, Fixed Asset & Free Cash Flows

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

<p style="text-align: justify;">A month after we pointed out the risk emanating from the new strain of a Corona virus (COVID-19) to the global economic recovery, the market still cannot fathom how bad this crisis will be. We were worried on the local outbreak outside China and here we are, the outbreaks in the US, Italy, France, Germany, Spain, and Iran; away from Asia where it all started.</p>
<p style="text-align: justify;">Though we heard it could take anywhere from 12-18 months to develop the vaccine and the situation in China is improving, the situation in the western hemisphere is no nowhere near the peak. Assuming China has gone over the peak in 2 months (mid-January to mid-March) and it will take the western hemisphere and Iran to go over the peak in exactly the same duration, 2 months is a long time and anything can happen, in our view. Then after mid-May when the “carpet bombing” will have finished, we still need to re-assess the damage which could take months to know factually. The two unknowns are (1) how bad the infection would be in the US and Europe, given the level of unpreparedness, and (2) how much damage this virus will be on the global economy.</p>
<p style="text-align: justify;">We are of the opinion that the damage will be very difficult to gauge as the proportion of the virus infection has never happened in recent history. We are of the opinion that COVID-19 fears will be here to stay until the vaccine is successfully developed. The return of COVID-19 in September after the summer in northern hemisphere cannot be ruled out.</p>
<p style="text-align: justify;">We believe central banks are seeing what we see and will come out with more quantitative easing measures and fiscal stimulus in such a large scale, following the US Federal Reserve (Fed) and Bank of England’s recent 50-bp cut. A failure to stimulate the global economy at the scale of Lehman default crisis in September 2008 could see a further adjustment, in our view. What makes it harder for central banks this time around is that consumer confidence is affected by the fear of infection and death caused by COVID-19 which money cannot help alleviate. As a result, the failure to reassure public safety will make the QE or the fiscal stimulus package ineffective, in our judgment.</p>
<p style="text-align: justify;"><strong>We are bracing for a global recession this year and expect volatility to persist for another 2 months as a result of pandemic conditions in the US and Europe. We do not believe risky assets should be accumulated at the time of this report on too many uncertainties.</strong> In the longer run, lower oil prices on Saudi-Russia conflict will benefit Asia as a net oil importer. We expect further spread widening for emerging markets bonds as defaults are expected to rise significantly.</p>

A month after we pointed out the risk emanating from the new strain of a Corona virus (COVID-19) to the global economic recovery, the market still cannot fathom how bad this crisis will be. We were worried on the local outbreak outside China and here we are, the outbreaks in the US, Italy, France, Germany, Spain, and Iran; away from Asia where it all started.
Though we heard it could take anywhere from 12-18 months to develop the vaccine and the situation in China is improving, the situation in the western hemisphere is no nowhere near the peak. Assuming China has gone over the peak in 2 months (mid-January to mid-March) and it will take the western hemisphere and Iran to go over the peak in exactly the same duration, 2 months is a long time and anything can happen, in our view. Then after mid-May when the “carpet bombing” will have finished, we still need to re-assess the damage which could take months to know factually. The two unknowns are (1) how bad the infection would be in the US and Europe, given the level of unpreparedness, and (2) how much damage this virus will be on the global economy.
We are of the opinion that the damage will be very difficult to gauge as the proportion of the virus infection has never happened in recent history. We are of the opinion that COVID-19 fears will be here to stay until the vaccine is successfully developed. The return of COVID-19 in September after the summer in northern hemisphere cannot be ruled out.
We believe central banks are seeing what we see and will come out with more quantitative easing measures and fiscal stimulus in such a large scale, following the US Federal Reserve (Fed) and Bank of England’s recent 50-bp cut. A failure to stimulate the global economy at the scale of Lehman default crisis in September 2008 could see a further adjustment, in our view. What makes it harder for central banks this time around is that consumer confidence is affected by the fear of infection and death caused by COVID-19 which money cannot help alleviate. As a result, the failure to reassure public safety will make the QE or the fiscal stimulus package ineffective, in our judgment.
We are bracing for a global recession this year and expect volatility to persist for another 2 months as a result of pandemic conditions in the US and Europe. We do not believe risky assets should be accumulated at the time of this report on too many uncertainties. In the longer run, lower oil prices on Saudi-Russia conflict will benefit Asia as a net oil importer. We expect further spread widening for emerging markets bonds as defaults are expected to rise significantly.

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

<div><p style="text-align: center;"><strong> • RELATIVE PRICE SCORE - COMPANIES •</strong></p></div><div>
<strong>RELATIVE PRICE SCORE OUTLIERS </strong>- The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can reveal attractive trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months.</div><div></div><div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/886/original/2020-03-02_09-36-07.png?1583109407" class="editor-image img-responsive" data-smartkarma-image-id="120886"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>OVERBOUGHT MEAN REVERSION</strong> - Examples of larger-cap companies that have reverted from being Overbought in the last quarter are <a href="https://www.smartkarma.com/entities/systena-corp" target="_blank" data-smartkarma-citation="entities:20438:1" rel="noopener">Systena (2317 JP)</a> which was Very Overbought two quarters ago, <a href="https://www.smartkarma.com/entities/kotobuki-spirits-co-ltd" target="_blank" data-smartkarma-citation="entities:20062:1" rel="noopener">Kotobuki Spirits (2222 JP)</a>, <a href="https://www.smartkarma.com/entities/toei-co-ltd" target="_blank" data-smartkarma-citation="entities:15379:1" rel="noopener">Toei (9605 JP)</a>, and the amusement park operator <a href="https://www.smartkarma.com/entities/fuji-kyuko-co-ltd" target="_blank" data-smartkarma-citation="entities:1305:1" rel="noopener">Fuji Kyuko (9010 JP)</a>, which began to mean-revert well before the emergence of Covid-19. The average decline from their peak of these stocks is 34%, which compares with an 11% decline for the market overall.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/887/original/2020-03-02_09-42-41.png?1583109791" class="editor-image img-responsive" data-smartkarma-image-id="120887"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>OVERSOLD MEAN REVERSION</strong> - The four large caps that have reverted from being Oversold have outperformed by over 20% on average, led by <a href="https://www.smartkarma.com/entities/mercari-inc" target="_blank" data-smartkarma-citation="entities:27149:1" rel="noopener">Mercari (4385 JP)</a> which we suggested was <em>'due for another bounce</em>' in our December Insight. Otherwise, <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/chugoku-electric-power-co" target="_blank" data-smartkarma-citation="entities:16243:1" rel="noopener">Chugoku Electric Power (9504 JP)</a>, <a href="https://www.smartkarma.com/entities/tv-asahi-holdings-corp" target="_blank" data-smartkarma-citation="entities:8830:1" rel="noopener">Tv Asahi (9409 JP)</a>, and <a href="https://www.smartkarma.com/entities/suntory-beverage-food-ltd" target="_blank" data-smartkarma-citation="entities:8218:1" rel="noopener">Suntory Beverage &amp; Food (2587 JP)</a> all saw substantial recoveries.</p>
</div><div></div><div><div class="content-highlight"><p>Following on from our previous Insight <a href="https://www.smartkarma.com/insights/japan-march-sector-peer-group-relative-price-scores" target="_blank" data-smartkarma-citation="insights:36972" rel="noopener">March Sector &amp; Peer Group Relative Price Scores -</a>  which covered Sectors and Peer Groups, in the<strong> DETAIL </strong>section below, we update our list of Overbought and Oversold large-cap companies (market capitalisation over ¥100b) with the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4.5) and Oversold (RPS &lt;-2) companies, as well as the largest positive and negative 3-month Changes in RPS adding some stock-specific comments in each category.</p></div></div>

 • RELATIVE PRICE SCORE - COMPANIES •
RELATIVE PRICE SCORE OUTLIERS - The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can reveal attractive trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months.
Source • Japan Analytics
OVERBOUGHT MEAN REVERSION - Examples of larger-cap companies that have reverted from being Overbought in the last quarter are Systena (2317 JP) which was Very Overbought two quarters ago, Kotobuki Spirits (2222 JP), Toei (9605 JP), and the amusement park operator Fuji Kyuko (9010 JP), which began to mean-revert well before the emergence of Covid-19. The average decline from their peak of these stocks is 34%, which compares with an 11% decline for the market overall.
Source • Japan Analytics
OVERSOLD MEAN REVERSION - The four large caps that have reverted from being Oversold have outperformed by over 20% on average, led by Mercari (4385 JP) which we suggested was 'due for another bounce' in our December Insight. Otherwise, Japan Post Bank (7182 JP), Chugoku Electric Power (9504 JP), Tv Asahi (9409 JP), and Suntory Beverage &amp; Food (2587 JP) all saw substantial recoveries.
Following on from our previous Insight March Sector &amp; Peer Group Relative Price Scores -  which covered Sectors and Peer Groups, in the DETAIL section below, we update our list of Overbought and Oversold large-cap companies (market capitalisation over ¥100b) with the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4.5) and Oversold (RPS &lt;-2) companies, as well as the largest positive and negative 3-month Changes in RPS adding some stock-specific comments in each category.

🇯🇵 JAPAN • March Company Relative Price Scores - Playing the Extremes

Japan

Nippon Steel Corp is an integrated steel maker. The Company produces various types of steel products used for industrial machinery & equipment and exports them worldwide.  Nippon Steel provides plant construction and urban development and also develops new businesses such as chemicals, ceramics, electronic equipment and information & communication systems.

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Nippon Steel Corporation (5401 JP)

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🇯🇵 JAPAN • March Company Relative Price Scores - Playing the Extremes

• RELATIVE PRICE SCORE - COMPANIES • RELATIVE PRICE SCORE OUTLIERS - The Relative Price Score (RPS) is a measure of price performance relative to...

Campbell Gunn

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