Fat pitch value: Japanese company in a deep downturn
Some background. The Yen is at some of the lowest value to the USD and EURO in decades. Here is the chart by @ValueSeeker_ on X
While I don’t do macro predictions about rates and debt, I like exposure to currencies that show big deviations from the average (or the median as shown in the chart).
In my opinion, It is not logical that people from France come back from Japan saying that everything is super cheap. Japan is an industrialised nation with worldwide leaders in products and services, and should be on par with other industrialised nations on prices.
It is reasonable to bet a part of the portfolios on a return towards the mean. So what could you do?
You could buy any Japanese company with domestic revenue
»This could give you a potential 20-60% currency gain.
But what if you could buy a company that has suffered from the weak yen?
A company that would see earnings jump with a stronger yen?
A company experiencing their worst market conditions in ten years..
but still profitable today and under 9 times profit?
A consolidator in the industry?
A 4.5% dividend
A stock price flat since 2017.
A management that is communicating in English and detailing the business plan in great details.
Zero write ups online, one now offline by Marc in Spanish in 2021 (Thanks Marc - You’re a legend)
This idea is not without risks and I did not bet the farm, but I bough it. It is a micro cap distributor in Japan - a cyclical company, with low margins, and illiquid. But they welcome the downturn to buy competitors, showing their long term view.
But sometimes, it’s worth buying illiquid micro caps because they can double.
It’s a company I will probably keep adding to depending on how the results develop.