8 undervalued Japan stocks 📈🗾
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Listened to Huberman’s latest pod with Tim Ferriss, and one of the ways Ferriss finds new ideas is to explore the old.
So, I took his advice and went back to the roots of value investing. And it proved to be a fruitful trip.
Using Benjamin Graham’s Net Net strategy (some may know it as “cigar butt” investing), I found 8 undervalued stocks in Japan.
Why Japan? 🗾
After what feels like a lifetime of deflation and depressed markets, the Japan stock markets are finally on a resurgence.
Recently, the Nikkei 225 finally broke new heights for the first time since 1990!
Anyway, let’s get to the crux of this article:
8 undervalued Japan Stocks for aspiring Japan investors
1) NKK Switches (6943)
As their name suggests, NKK Switches makes and sells industrial switches globally.
Their products are being used across many industries from sound equipment to automobiles to wireless communication services.
Current Assets = ¥84.1m
Total Liabilities = ¥22.8m
Net Net (after 33% discount) = ¥40.8m
Market Cap = ¥30.8m
Piotroski F-Score: 8
2) Sanyo Industries (5958)
Sanyo Industries makes and sells hardware and material for the construction industry. They are also involved in the manufacturing of ventilation systems and other related equipment.
Current Assets = ¥152.4m
Total Liabilities = ¥77.1m
Net Net (after 33% discount) = ¥50.2m
Market Cap = ¥45.5m
Piotroski F-Score: 9
3) Sata Construction (1826)
Sata Construction specializes in the construction of civil engineering works and building construction works. The company also sells asphalt mixture and construction materials as well as rents construction equipment.
Current Assets = ¥162.5m
Total Liabilities = ¥84.4m
Net Net (after 33% discount) = ¥52.1m
Market Cap = ¥48.9m
Piotroski F-Score: 9
4) Nakayamafuku (7442)
Nakayamafuku sells kitchen, dining, horticulture and interior goods in Japan.
Current Assets = ¥151.2m
Total Liabilities = ¥72.5m
Net Net (after 33% discount) = ¥52.1m
Market Cap = ¥47.1m
Piotroski F-Score: 8
5) Money Partners Group (8732)
Money Partners Group is a foreign exchange margin trading business that serves both consumers (think money changers) and businesses. It also offers a SaaS solution for compliance, KYC, CMS and security for its corporate clients.
Current Assets = ¥533.3m
Total Liabilities = ¥443.1m
Net Net (after 33% discount) = ¥60.1m
Market Cap = ¥60m
Piotroski F-Score: 8
6) Mutoh Holdings (7999)
Mutoh makes and sells industrial grade printers, scanners, 3D printers, CAD plotters and related products.
To complement its products, Mutoh also offers related services and solutions. They have a global presence with offices in Japan, Europe, Australia and America.
Current Assets = ¥133.8m
Total Liabilities = ¥37m
Net Net (after 33% discount) = ¥64.6m
Market Cap = ¥55.8m
Piotroski F-Score: 8
7) Marufuji Sheet Piling (8046)
Another manufacturer of construction materials, Marufuji Sheet Piling makes and distributes steel, iron and related products.
Current Assets = ¥257.7m
Total Liabilities = ¥116.9m
Net Net (after 33% discount) = ¥93.9m
Market Cap = ¥56.1m
Piotroski F-Score: 8
8) Foster Electric (6794)
Foster Electric makes and sells speakers, audio and electronic equipment globally.
On top of supplying audio hardware to its customers, Foster Electric has its own range of high quality speakers and monitor brand, Fostex.
Current Assets = ¥556.6m
Total Liabilities = ¥273.8m
Net Net (after 33% discount) = ¥188.5m
Market Cap = ¥145.9m
Piotroski F-Score: 8
How did I get this list of stocks? 🤔
This list of undervalued Japanese stocks was screened using Benjamin Graham’s Net Net strategy.
To reduce the risk further, I applied an additional indicator, selecting only stocks whose Piotroski F-score was more than 8 which suggested a good level of financial strength.
🛑Japan Net Net Stocks could be risky
Obviously this article doesn’t serve as financial advice. But we should still talk about the elephant in the room: RISK 💀
Although Japan has one of the most established stock markets in the world and is a popular travel destination, it is still struggling to get its economy back on its feet.
😔 Impact of the “Lost Decade” lingers
The 1990s are commonly referred to as the "Lost Decade" where Japan experienced a prolonged period of economic stagnation.
Although that took place way back when…the impact of the Lost Decade continues to linger and many investors are still uncomfortable about putting their capital into the Land of the Rising Sun.
👴Boomer business culture holds Japan back
Japan's business culture is characterized by complex corporate structures, cross-shareholdings, and conservative management practices.
This boomer management style means that foreign investors can find it difficult to navigate the market effectively.
🫠 Financials are not easy to obtain
Most Japan stocks are traded by the Japanese. This means it's not easy for us to access financial statements; of the 8 listed here, 6 had English websites, and only 3 had translated their annual reports to English!
The Japanese stock market also follows a different reporting calendar and accounting standards.
That said, the Japanese government is actively trying to change all these and promote foreign investment to revitalize interest in Japan stocks. This could be why even Buffett is willing to allocate some of his capital there.
Disclaimer: Nothing I write here serves as financial advice, you should do your own due diligence to pick the best stocks that suit your investing objectives.