Comments on: Japanese liquidation value: 1932 US redux

By: The Kabuki narrative « Greenbackd

The Kabuki narrative « Greenbackd — Fri, 12 Feb 2010 05:15:42 +0000

[...] Fer it: Net current asset value stocks have performed remarkably well throughout the investing world and over time. In support of this argument I cite generally Graham’s experience, Oppenheimer’s Ben Graham’s Net Current Asset Values: A Performance Update paper, Testing Ben Graham’s Net Current Asset Value Strategy in London, a paper from the business school of the University of Salford in the UK, and, more specifically, Bildersee, Cheh and Zutshi’s The performance of Japanese common stocks in relation to their net current asset values, James Montier’s Graham’s net-nets: outdated or outstanding?, and Dylan Grice’s Are Japanese equities worth more dead than alive. [...]

By: 5 big Japanese Graham net nets « Greenbackd

5 big Japanese Graham net nets « Greenbackd — Wed, 10 Feb 2010 05:05:14 +0000

[...] 10, 2010 by greenbackd In his Are Japanese equities worth more dead than alive?, SocGen’s Dylan Grice conducted some research into the performance of sub-liquidation value [...]

By: Performance of Japanese sub-liquidation value stocks: the results « Greenbackd

Wed, 10 Feb 2010 05:04:41 +0000

[...] 9, 2010 by greenbackd Since last week’s Japanese liquidation value: 1932 US redux post, I’ve been attempting to determine whether the historical performance of Japanese [...]

By: Performance of Japanese sub-liquidation value stocks « Greenbackd

Performance of Japanese sub-liquidation value stocks « Greenbackd — Mon, 08 Feb 2010 05:01:08 +0000

[...] but obviously a difficult period through 1987 and not an exact facsimile of Graham’s strategy. An astute reader notes that ”…the test period for that study is not the best. It includes Japan’s best [...]

By: Mart

Mart — Sun, 07 Feb 2010 12:40:03 +0000

Interesting article, i like the ideas of Grice ( and J. Montier, really sorry that James left SG). Japan Valuation and currencies situation saved me in 08-09 turmoil. Valuations are low, that’s what we knew for a while and you are discussing here about a market going down for more than 20 years and we know all the circumstances. I keep it with JME (J.M. Eveillard) buying cheap world class business and some small and mid cap bus. on valuation base there. It really makes a lot of fun, sometimes when investing there, i feel like the first human being on a unknown planet. 25 years ago, everybody was talking to me about beautiful investment opport. in Japan – companies were mentioned to me i had never heard about before (but you had to own it, valuations….why !??????). What difference 2 decades make – now sometimes the same people telling me i should stay away its to uncertain (future is always uncertain). Why, is it to expensive? No, it is unbelievable it is to c h e a p but outside the herd it is cold and uncomfortable. But wearing the right quality and valuations it is really a nice area.

By: William Mitchell

William Mitchell — Sat, 06 Feb 2010 00:52:05 +0000

I want this to be true, because it is logical, matches public market behavior in the US, and opens up so many apparent bargains.

But the test period for that study is not the best. It includes Japan’s best analog to America’s Roaring Twenties. The Nikkei peaked on 12/29/89, and never recovered.

Many of the “assets” on public companies’ books at that time were real estate bubble-related. At the peak in 1989, the aggregate market price for all private real estate in the city of Tokyo was purportedly greater than that of the entire state of California. You can see how the sudden runup in real estate during the bubble could cause asset-heavy companies to outperform the market.

So a better crucible for Japanese NCAVs might be the deflationary period, say beginning 1/1/90, which is more analogous to the US in 1932.

By: stockmanmarc

stockmanmarc — Fri, 05 Feb 2010 22:13:50 +0000

Very good article!

For those interested check out Interactive Brokers, you might be able to trade Japanese equities. They seem to offer many different instruments to trade/invest.

By: Nate

Nate — Fri, 05 Feb 2010 13:56:59 +0000

Also, what do you use to screen Japanese stocks? Does Fidelity’s screener tool for for international exchanges? I thought it was limited to the US exchanges and foreign stocks that trade as ADRs.

By: Nate

Nate — Fri, 05 Feb 2010 13:56:01 +0000

Unfortunately I don’t have a million dollars or place over 120 trades a year which Fidelity requires to get the international trading.

By: greenbackd

greenbackd — Fri, 05 Feb 2010 01:29:46 +0000

I'm a little chary of the "Japan has weak shareholder rights" narrative. A 1993 paper analyzed the performance of Japanese net nets between 1975 and 1988: Bildersee, J. B., Cheh, J. J. and Zutshi, A. (1993). "The performance of Japanese common stocks in relation to their net current asset values." Japan and the World Economy 5: 197-215. Here are the paper's findings described in another paper:

In the first study outside of the USA, Bildersee, Cheh and Zutshi (1993)’s paper focuses on the Japanese market from 1975 to 1988. In order to maintain a sample large enough for cross-sectional analysis, Graham’s criterion was relaxed so that firms are required to merely have an NCAV/MV ratio greater than zero. They found the mean market-adjusted return of the aggregate portfolio is around 1 percent per month (13 percent per year).

Not a great return, but obviously a difficult period through 1987 and not an exact facsimile of Graham's strategy. It would be interesting to see an update.