"Investing in Japan" provides indispensable information about one of the world's largest stock markets. Long disregarded by investors, Japan is a dream-come-true for value investors. And there is no other English source of information about Japanese equities like "Investing in Japan." Readers will find the following and much more: brief overview of value investing (helpful to those less familiar; hearing its merits is never redundant to practitioners); Challenge the conventional wisdom of Japan being on its last leg (a kind way of putting it compared to some others’); Comprehensive overview of investing in Japan including various must-know idiosyncrasies; The shortcomings of Japan-focused mutual funds and ETFs, which could save current/potential investors significant time and money; The odd marketing of funds to Japanese investors; Everything you need to know about ADRs; Review of select value hedge and mutual funds investing in Japan and value-focused Japanese funds; Valuation metrics and comparison to other markets; Hedge funds’ investments in Japan; The oft-cited matter of low returns on equity; Some surprising (positive) information on shareholder rights and corporate governance. Meticulously researched, "Investing in Japan" has 140 footnotes from English and Japanese sources. Description from the back cover: There is no stock market as undervalued and as misunderstood as Japan. "Investing in Japan" is truly unique in that it fills the void of information in English about Japanese stocks, and contrary to popular Japan-is-doomed opinion, it presents plenty of reasons to be bullish. Readers will develop a solid understanding of the Japanese stock market, and learn why returns on equity appear to be low, about hedge funds' investment activities, Japan's surprisingly strong shareholder rights, and more. "Investing in Japan" will equip investors with invaluable information that will allow them to participate in what is likely to be a once-in-a-lifetime opportunity. It is very rare indeed that almost an entire market can trade at a discount to net asset value, have simple and sound balance sheets, and positive earnings.
Investing in Japan
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Book Description
Editorial Reviews
About the Author
Steven is a value investor and shareowner rights proponent with a successful track record enhancing value and engaging management/directors in Japan; he has done extensive proxy-related work independently and with the U.S. Proxy Exchange. Steven is co-founder of Nippon Value Capital, an activist hedge fund startup seeking to enhance Japanese equity valuations through a combination of improved asset efficiency, excess capital allocation, and corporate action. He has lived in Japan for over 12 years and has the highest level of Japanese language proficiency certified by the Japanese government. Website: http://steventowns.com
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5 of 6 people found the following review helpful
Format:Paperback
Towns might be right: "There is no stock market as undervalued and as misunderstood as Japan." He guides the reader to plenty of undervalued companies but will their underlying value be eventually recognized? There is a dearth of activism, especially given relatively strong shareowner rights. I'm not about to plunge into a broad index of Japanase companies but honing in on a few unappreciated gems and working to unlock value looks like it could be rewarding... especially if you can team with someone like Towns who has been there.
Towns briefly covers the basics of value investing before plunging into the mysteries of the TOPIX (1&2) Mothers, and JASDAQ. If you are at all thinking about investing in mutual funds, ETFs, ADRs, etc., Towns' advice could easily save you the price of the book on your first buy. It seems that much of the market is traded very thinly, especially domestically (in Japan). Among the largest funds, there is not a single one, besides the Nikkei 225 and TOPIX index funds that focus on a domestic equity strategy. Compare that to the US, where there are probably more funds than stocks. Towns warns us that sales loads and fund fees often average more than 4% on Japanese funds, so even strong performance fails to attract interest from domestic investors.
Turning to stocks, "coverage of stocks has been on the decline, meaning ever fewer professionals are evaluating stocks based on fundamental value. Unlike developing markets, market measures are plentiful in Japan. One that looks interesting is the Dividend Focus 100 Index, well worth reviewing for its constituents."
Towns goes into several market features that act as obstacles to investment, such as shares with multi-thousand dollar per share prices, apparently set to avoid extortion by sokaiya (corporate racketeers) who would buy a single share and threaten to disrupt the AGM. I was already familiar with companies holding their meetings on the same day to minimize such disruptions but wasn't aware of the shift to higher prices stock to avoid infiltration.
Price has somewhat been addressed by the issuance of "mini shares," priced more like most US stocks. However, you can't place limit orders on such stocks, they don't receive voting rights and you don't get some of the shareowner perks available to holders of regular shares. Advises Towns, "reducing and/or eliminating minimum trading units would bode well for broader and deeper market participation." A 2010 article reported that about 15% of stocks listed on Japan's three emerging markets were untraded more than half of each month. Towns goes into some of the intricacies of parent and subsidiary listings, as well as cross shareholdings. Interesting that some subsidiaries are price by the market at almost as much as the parent company, making the parent company a real bargain if value can be recognized.
Cross-shareowning has dropped considerably and Towns advises: "Value and activist investors may find great investment opportunities by identifying undervalued companies that have equity holdings unrelated to their core businesses that can be sold."
Kagome became a favorite of retail Japanese investors by spicing up its annual meetings, turning them into focus sessions and hosting annual buffet parties. I'd like to see that kind of shift at U.S. companies, instead of moving to lockout meetings where shareowners get a virtual-only experience.
Most fascinating for me is the brief descriptions Towns provides of various activists efforts, including his own, demonstrating that value can be unlocked. So far, it looks like activism is mostly coming from abroad. Overseas investors now account for a quarter to a third of the market and two thirds of daily trading.
With less than 4% of Japanese individuals' assets in equities, I'm guessing the whole market could move under the right circumstances. (That's my guess, not that of Towns.) Shareowner rights are certainly there for those who own at least one minimum unit. Elections are determined by majority vote, cumulative voting can be requested, shareowner lists are more readily available, meetings more easily called and several more important rights bode well for future battles.
At one point, Towns even seeks alliances in "friendly" activist efforts at a specific company. As a fellow member of the United States Proxy Exchange, I may just join him. I had my doubts about investing in Japan but Towns now has me convinced there are many candidates for the value investor. Now, if I can only find similar books for investing in China, India, Indonesia, Brazil, Chile, etc. While those markets aren't as undervalued or misunderstood as Japan's, they are still a mystery to most of us. At least I now feel a lot more educated and confident about Japanese markets, thanks to Steven Towns.
Towns briefly covers the basics of value investing before plunging into the mysteries of the TOPIX (1&2) Mothers, and JASDAQ. If you are at all thinking about investing in mutual funds, ETFs, ADRs, etc., Towns' advice could easily save you the price of the book on your first buy. It seems that much of the market is traded very thinly, especially domestically (in Japan). Among the largest funds, there is not a single one, besides the Nikkei 225 and TOPIX index funds that focus on a domestic equity strategy. Compare that to the US, where there are probably more funds than stocks. Towns warns us that sales loads and fund fees often average more than 4% on Japanese funds, so even strong performance fails to attract interest from domestic investors.
Turning to stocks, "coverage of stocks has been on the decline, meaning ever fewer professionals are evaluating stocks based on fundamental value. Unlike developing markets, market measures are plentiful in Japan. One that looks interesting is the Dividend Focus 100 Index, well worth reviewing for its constituents."
Towns goes into several market features that act as obstacles to investment, such as shares with multi-thousand dollar per share prices, apparently set to avoid extortion by sokaiya (corporate racketeers) who would buy a single share and threaten to disrupt the AGM. I was already familiar with companies holding their meetings on the same day to minimize such disruptions but wasn't aware of the shift to higher prices stock to avoid infiltration.
Price has somewhat been addressed by the issuance of "mini shares," priced more like most US stocks. However, you can't place limit orders on such stocks, they don't receive voting rights and you don't get some of the shareowner perks available to holders of regular shares. Advises Towns, "reducing and/or eliminating minimum trading units would bode well for broader and deeper market participation." A 2010 article reported that about 15% of stocks listed on Japan's three emerging markets were untraded more than half of each month. Towns goes into some of the intricacies of parent and subsidiary listings, as well as cross shareholdings. Interesting that some subsidiaries are price by the market at almost as much as the parent company, making the parent company a real bargain if value can be recognized.
Cross-shareowning has dropped considerably and Towns advises: "Value and activist investors may find great investment opportunities by identifying undervalued companies that have equity holdings unrelated to their core businesses that can be sold."
Kagome became a favorite of retail Japanese investors by spicing up its annual meetings, turning them into focus sessions and hosting annual buffet parties. I'd like to see that kind of shift at U.S. companies, instead of moving to lockout meetings where shareowners get a virtual-only experience.
Most fascinating for me is the brief descriptions Towns provides of various activists efforts, including his own, demonstrating that value can be unlocked. So far, it looks like activism is mostly coming from abroad. Overseas investors now account for a quarter to a third of the market and two thirds of daily trading.
With less than 4% of Japanese individuals' assets in equities, I'm guessing the whole market could move under the right circumstances. (That's my guess, not that of Towns.) Shareowner rights are certainly there for those who own at least one minimum unit. Elections are determined by majority vote, cumulative voting can be requested, shareowner lists are more readily available, meetings more easily called and several more important rights bode well for future battles.
At one point, Towns even seeks alliances in "friendly" activist efforts at a specific company. As a fellow member of the United States Proxy Exchange, I may just join him. I had my doubts about investing in Japan but Towns now has me convinced there are many candidates for the value investor. Now, if I can only find similar books for investing in China, India, Indonesia, Brazil, Chile, etc. While those markets aren't as undervalued or misunderstood as Japan's, they are still a mystery to most of us. At least I now feel a lot more educated and confident about Japanese markets, thanks to Steven Towns.
7 of 9 people found the following review helpful
By Nate Tobik
Format:Paperback
This is the book I wish I would have had before I started to invest in Japanese equities. Even now that I have some experience in the Japan market I was able to learn alot from this book.
Steven Towns starts off by giving an overview of the market from a value investors perspective. You won't find much discussion of technical analysis or buying on dips in this book. The focus is for investors who want to buy quality companies cheaply and hold for the long term.
The book then goes into the nuts and bolts aspect of Japanese equities. There are a lot of things about the Japanese market that can seem strange to a foreigner, pretty much every important aspect is discussed, from trading lots, and dividends to why companies list subsidiaries instead of spinning them off.
Two areas where this book really shines:
Busting the myth that Japan should be avoided
Discussing shareholder activism and shareholder rights in Japan
Steven Towns starts off by giving an overview of the market from a value investors perspective. You won't find much discussion of technical analysis or buying on dips in this book. The focus is for investors who want to buy quality companies cheaply and hold for the long term.
The book then goes into the nuts and bolts aspect of Japanese equities. There are a lot of things about the Japanese market that can seem strange to a foreigner, pretty much every important aspect is discussed, from trading lots, and dividends to why companies list subsidiaries instead of spinning them off.
Two areas where this book really shines:
Busting the myth that Japan should be avoided
Discussing shareholder activism and shareholder rights in Japan
2 of 2 people found the following review helpful
5.0 out of 5 stars
The best guide for understanding Japan equity market / corporate governance
August 2, 2012
By hm
Format:Kindle Edition|Amazon Verified Purchase
I could definitely recommend this book is the best guide for understanding the Japanese stock market.
I have been working in investment banking industry in Japan for long time. I have never seen a book like this which well explains the Japanese undervalued stock market and Japanese corporate governance. I totally agree Steven's argument (i.e. significant undervaluation of Japan equities, unique corporate governance) and believe in the significant opportunity in investing in Japan.
However, I believe it is easy to understand the Japan's undervalued market but it is not so easy to unlock such undervalued stocks. Many activist investors tried to acquire Japanese companies in a hostile way in the past but most of the attempt were not successful. I believe people like Towns who understands the Japanese corporate culture very well may possibly take right investment strategy.
In the book, he also addressed typical concerns/ misconception by foreign investors (e.g. decreasing population, large government debt) . His arguments for such concerns are also quite persuasive. Japan is not a growth market but still in quite stabile economy and significantly undervalued compared to US or Euro companies.
I have been working in investment banking industry in Japan for long time. I have never seen a book like this which well explains the Japanese undervalued stock market and Japanese corporate governance. I totally agree Steven's argument (i.e. significant undervaluation of Japan equities, unique corporate governance) and believe in the significant opportunity in investing in Japan.
However, I believe it is easy to understand the Japan's undervalued market but it is not so easy to unlock such undervalued stocks. Many activist investors tried to acquire Japanese companies in a hostile way in the past but most of the attempt were not successful. I believe people like Towns who understands the Japanese corporate culture very well may possibly take right investment strategy.
In the book, he also addressed typical concerns/ misconception by foreign investors (e.g. decreasing population, large government debt) . His arguments for such concerns are also quite persuasive. Japan is not a growth market but still in quite stabile economy and significantly undervalued compared to US or Euro companies.
Most Recent Customer Reviews
5.0 out of 5 stars
Investing in Japan: There is no stock market as undervalued and as...
This comprehensive book was very insightful in its discussion of the japanese equity market and how it was done in a concise manner. Read more
Published 6 months ago by HOWARD L JOHNSON
5.0 out of 5 stars
Gem of a book about a misunderstood market
"Investing in Japan" proved to be very informative about the Japanese market, explaining many things that I hadn't understood or had questions about. Read more
Published 6 months ago by Mark S. Fuhrer
5.0 out of 5 stars
Shines a rare, yet welcome, spotlight on Japanese equity opportunities
Investing in Japan has proven a frustrating experience for a long time. While many investors have "thrown in the towel", or may be about to do so, Steven Towns' wonderful book... Read more
Published 11 months ago by Oliver Mihaljevic
2.0 out of 5 stars
Not deep enough
I bought this book out of Nate Tobik's recommendation, and I have to say Mr. Tobik's blog provides much more content and analysis than this book. Read more
Published 11 months ago by Andy
2.0 out of 5 stars
recommend only to novice investors
just finished reading, and i must say that it was a bit disappointing. i do agree with all the things mr towns says about the misunderstood aspects of japan, but i wish there was... Read more
Published 12 months ago by Reader
5.0 out of 5 stars
If you're a value investor, this is recommended reading
Because of its relative "opaqueness", Japanese society and culture can seem mysterious and alien to most outsiders. Read more
Published 13 months ago by Jonathan S.
