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Investing in Japan is as enticing as discovering a hidden treasure trove!

If you've perused our emails, you probably know that Japanese stocks are remarkably undervalued.

This is precisely why the Quant Value newsletter has been advocating for numerous companies in Japan – more on this later.

In this correspondence, let's delve deeper into why stocks in Japan present such an attractive opportunity and why it's a prime time to capitalize on it.

I'll also share two exceptionally compelling investment concepts.

Complete Transparency

I hold investments in both Japan Petroleum Exploration Co. Ltd. and Inpex Corporation, but naturally, I cannot assert their suitability for you. Hence, please conduct your own research or consult your financial advisor if these companies pique your interest.

The Investment Landscape in Japan

The reasoning behind Japan being a captivating investment haven is succinctly encapsulated in an investment bulletin from the esteemed fund manager, Orbis.

In their Quarterly Commentary – Orbis Japan Equity dated 30 June 2023, they delineate the existing investment climate in Japan as follows (paraphrased);

1. Japan has undergone substantial changes in terms of corporate governance and emphasis on shareholders over the past few years. However, progress had been sluggish until now.
2. Historically, Japanese companies had little to no focus on shareholders. They generated meager returns and hoarded cash instead of distributing it to investors.
3. Efforts to ameliorate the situation commenced after Shinzo Abe's election, with initiatives such as the Ito Review in 2014, the Stewardship Code in 2014, and the Corporate Governance Code in 2015. These were all aimed at enhancing investor engagement, governance, and transparency.
4. The reforms bore fruit, resulting in commitments to dividend growth, share buybacks, and enhanced investment discipline.
5. In 2023, there was a MOMENTOUS positive development wherein the Tokyo Stock Exchange mandated companies to “accurately identify the company’s cost of capital and capital efficiency, evaluate these statuses and its stock price and market capitalization…”. The pivotal point lay in the announcement's conclusion, stipulating that companies must “…disclose policies and specific initiatives for improvement… Especially for companies that unequivocally need to improve, such as those with a PBR (price-to-book ratio) consistently below 1x.”

As evident, the overall landscape is markedly improving, and here's how you can reap the rewards.

Japanese Investment Proposition

In the aforementioned report, Orbis highlighted two exceedingly alluring Japanese investment prospects (emphasis mine):

Consider oil and gas companies, Japan Petroleum Exploration (Japex) and Inpex, for instance. Together, they constitute nearly 15% of the Orbis Japan Strategy. Both are traded at a substantial discount—approximately half their book value— and 5-6 times earnings. In our assessment, neither are entities with fundamental issues that rationalize these undervalued assessments.

Japex presently holds 85% of its market value in net cash (85%!), and 50% in investment securities, a significant portion of which is in Inpex, another undervalued entity. Consequently, we are essentially acquiring Japex’s core business for nothing. Inpex is immensely profitable. Last year, the company generated cash flows equivalent to 20% of its present market valuation, driven by its liquefied natural gas project, Ichthys, which had been shunned by the market following years of delays. In our opinion, both entities could appreciably enhance their valuations by leveraging their sizable cash reserves or their ongoing cash generation to support higher dividends and expanded share buybacks.

Subsequent to the release of the report, the stock prices of both companies surged, and they also reported largely favorable half-year results despite declining oil and gas prices.

As I previously mentioned, subsequent to conducting supplementary research, I myself invested in both companies. Once again, please perform your own due diligence.

Quant Value Newsletter Update

As previously mentioned, the Quant Value newsletter has identified a plethora of significantly undervalued companies in Japan, surpassing the level of undervaluation seen elsewhere in the world.

Presently, we have 21 Japanese companies in the newsletter, yielding an average return of 17.6%.

If these prospects resonate with you, you can access more comprehensive details here: Your Blueprint for Unearthing Europe, Asia, and North America's Hidden Treasures!

Shareholder Yield Letter Update

Recall my mention of the undervaluation of the UK stock market; this is also reflected in the Shareholder Yield Letter’s portfolio. Seven of the 16 companies (44%) are listed on the London Stock Exchange.

These companies boast an average shareholder yield exceeding 10%, and pay a dividend of 5.5%. To refresh your memory, shareholder yield encompasses the sum of dividends as well as shares repurchased by the company.

If these are the kinds of companies that appeal to your investment sensibilities, you can find further details here: Embrace Ambitious Wins with our Superior Large-Cap Strategy!

Your guide to attaining maximal returns,

Tim

PS For pinpointing superb companies that align precisely with your investment strategy at this moment, click here.

PPS It’s effortless to get sidetracked – why not sign up now to avoid missing out?

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