'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/837/original/2019-01-18_11-35-42.png?1547778954" class="editor-image img-responsive" data-smartkarma-image-id="75837"></figure>
Source: Japan Analytics
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RELATIVE PRICE SCORE - The Relative Price Score (RPS) measures stock price performance relative to TOPIX and is calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are, as a result, on a comparable scale, 'overbought' and 'oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. This insight updates our list of overbought and oversold companies, reviews the best and worst performing companies by RPS over the last two months and adds some specific comments on stocks on each category.
RPS STATISTICS - The Company 'outlier' thresholds are set to "+4" for overbought and "-2" for oversold.  Currently, of the 3,686 listed companies for which monthly data is available, 91 companies are 'Overbought', and 120 are 'Oversold' - 2.5% and 3.2%, respectively of the total. For companies with a market capitalisation of over ¥100b, there are 35 'Overbought' and 24 'Oversold' companies. 
RPS 'TOPS' - In the last two years, 445 companies have achieved an RPS of '4' or more. 80% have seen their RPS fall to below '4' within the following two months. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 63% - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last two months have been <a href="https://www.smartkarma.com/entities/8225" target="_blank" data-smartkarma-citation="entities:8225:1">Descente (8114 JP)</a>,  <a href="https://www.smartkarma.com/entities/4908" target="_blank" data-smartkarma-citation="entities:4908:1">Ariake Japan (2815 JP)</a>, <a href="https://www.smartkarma.com/entities/15862" target="_blank" data-smartkarma-citation="entities:15862:1">Fancl (4921 JP)</a>, <a href="https://www.smartkarma.com/entities/13435" target="_blank" data-smartkarma-citation="entities:13435:1">Bandai Namco (7832 JP)</a>, <a href="https://www.smartkarma.com/entities/13475" target="_blank" data-smartkarma-citation="entities:13475:1">Don Quijote (7532 JP)</a>, and <a href="https://www.smartkarma.com/entities/1492" target="_blank" data-smartkarma-citation="entities:1492:1">Gmo Payment Gateway (3769 JP)</a>.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/838/original/2019-01-18_11-36-19.png?1547778995" class="editor-image img-responsive" data-smartkarma-image-id="75838"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/839/original/2019-01-18_11-37-01.png?1547779035" class="editor-image img-responsive" data-smartkarma-image-id="75839"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/840/original/2019-01-18_11-37-37.png?1547779070" class="editor-image img-responsive" data-smartkarma-image-id="75840"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/841/original/2019-01-18_11-38-07.png?1547779100" class="editor-image img-responsive" data-smartkarma-image-id="75841"></figure>
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Source: Japan Analytics
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RPS 'BOTTOMS' - 296 companies have seen their RPS fall to '-2' or below in the last two years. 58% have seen their RPS recover to above '-2' within three to six months. For larger capitalisation companies, the numbers are 72 companies and 67%. Some recent examples of positive RPS mean reversion in the last two months have been <a href="https://www.smartkarma.com/entities/22772" target="_blank" data-smartkarma-citation="entities:22772:1">LINE Corp (3938 JP)</a> - a 'contrarians only' selection in our last <a href="https://www.smartkarma.com/insights/japan-relative-price-score-update-overbought-and-oversold-companies" target="_blank" data-smartkarma-citation="insights:25849">Insight</a>, and <a href="https://www.smartkarma.com/entities/15457" target="_blank" data-smartkarma-citation="entities:15457:1">Tokyo Electric Power (9501 JP)</a>.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/842/original/2019-01-18_11-39-56.png?1547779218" class="editor-image img-responsive" data-smartkarma-image-id="75842"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/843/original/2019-01-18_11-42-06.png?1547779350" class="editor-image img-responsive" data-smartkarma-image-id="75843"></figure>
<div class="content-caption">Source: Japan Analytics</div>
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In the DETAIL section below we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the largest two-month positive and negative changes in RPS.
NB - All data is as of January 17th close.
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Source: Japan Analytics

RELATIVE PRICE SCORE - The Relative Price Score (RPS) measures stock price performance relative to TOPIX and is calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are, as a result, on a comparable scale, 'overbought' and 'oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. This insight updates our list of overbought and oversold companies, reviews the best and worst performing companies by RPS over the last two months and adds some specific comments on stocks on each category.
RPS STATISTICS - The Company 'outlier' thresholds are set to "+4" for overbought and "-2" for oversold.  Currently, of the 3,686 listed companies for which monthly data is available, 91 companies are 'Overbought', and 120 are 'Oversold' - 2.5% and 3.2%, respectively of the total. For companies with a market capitalisation of over ¥100b, there are 35 'Overbought' and 24 'Oversold' companies. 
RPS 'TOPS' - In the last two years, 445 companies have achieved an RPS of '4' or more. 80% have seen their RPS fall to below '4' within the following two months. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 63% - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last two months have been Descente (8114 JP),  Ariake Japan (2815 JP), Fancl (4921 JP), Bandai Namco (7832 JP), Don Quijote (7532 JP), and Gmo Payment Gateway (3769 JP).





Source: Japan Analytics

RPS 'BOTTOMS' - 296 companies have seen their RPS fall to '-2' or below in the last two years. 58% have seen their RPS recover to above '-2' within three to six months. For larger capitalisation companies, the numbers are 72 companies and 67%. Some recent examples of positive RPS mean reversion in the last two months have been LINE Corp (3938 JP) - a 'contrarians only' selection in our last Insight, and Tokyo Electric Power (9501 JP).


Source: Japan Analytics

In the DETAIL section below we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the largest two-month positive and negative changes in RPS.
NB - All data is as of January 17th close.


Japan: Relative Price Scores - Overbought and Oversold Companies - Calling 'Tops' & 'Bottoms'

Equity Bottom-Up

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/666/original/2019-01-16_11-24-02.png?1547605488" class="editor-image img-responsive" data-smartkarma-image-id="75666"></figure><div class="content-caption">Source: Japan Analytics</div>INTERIM UPDATE - <a href="https://www.smartkarma.com/entities/15778" target="_blank" data-smartkarma-citation="entities:15778:1">Pasona Group (2168 JP)</a> released their second-quarter results on January 11th. This Insight updates our recent Insight <a href="https://www.smartkarma.com/insights/pasona-non-grata" target="_blank" data-smartkarma-citation="insights:26973">Pasona Non-Grata</a> and re-iterates our buy recommendation. Pasona shares have risen by 15% this year to the intra-say high last Friday. Our target price remains ¥1,500 - a further 18% upside from today's level.

Source: Japan AnalyticsINTERIM UPDATE - Pasona Group (2168 JP) released their second-quarter results on January 11th. This Insight updates our recent Insight Pasona Non-Grata and re-iterates our buy recommendation. Pasona shares have risen by 15% this year to the intra-say high last Friday. Our target price remains ¥1,500 - a further 18% upside from today's level. 

Pasona : Interim Update - Still More Upside

PASONA NON-GRATA<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/074/451/original/2019-01-03_11-03-09.png?1546481000" class="editor-image img-responsive" data-smartkarma-image-id="74451"></figure>Source: Japan AnalyticsROUND TRIP - Temporary staffing company <a href="https://www.smartkarma.com/entities/15778" target="_blank" data-smartkarma-citation="entities:15778:1">Pasona (2168 JP)</a>'s shares have completed a year-long 'round trip' after reaching Overbought territory one year ago following the launch of an 'engagement campaign' by the activist investor, Oasis. In May 2018, the company took advantage of its elevated share price to sell 2.3m shares (of which 2m were Treasury Shares), prompting a sharp correction in the share price. In recent months, the shares have languished as the company's business performance has begun to deteriorate, reaching an 18-month low of 1,008 on 25th December, before rebounding 12% to close the year at ¥1,126.HOLDCO DISCOUNT - According to the Smartkarma <a href="https://www.smartkarma.com/tools/holdcos" target="_blank">HoldCo Monitor</a>, Pasona has the largest 'ListCo as a % of Market Cap' percentage at 365%, and the second-largest 'Discount to Net Asset Value' (78%) of the 77 companies that are tracked. With Pasona's interim results due to be released on Friday 11th, January, the Insight will look at the company's recent business performance, offer some guidelines for valuing the company and make two stock-specific recommendations. The format follows that of our recent Insight on <a href="https://www.smartkarma.com/insights/gmo-internet-9447-jp-grossly-or-modestly-overrated" target="_blank" data-smartkarma-citation="insights:26213">GMO Internet</a>.

PASONA NON-GRATASource: Japan AnalyticsROUND TRIP - Temporary staffing company Pasona (2168 JP)'s shares have completed a year-long 'round trip' after reaching Overbought territory one year ago following the launch of an 'engagement campaign' by the activist investor, Oasis. In May 2018, the company took advantage of its elevated share price to sell 2.3m shares (of which 2m were Treasury Shares), prompting a sharp correction in the share price. In recent months, the shares have languished as the company's business performance has begun to deteriorate, reaching an 18-month low of 1,008 on 25th December, before rebounding 12% to close the year at ¥1,126.HOLDCO DISCOUNT - According to the Smartkarma HoldCo Monitor, Pasona has the largest 'ListCo as a % of Market Cap' percentage at 365%, and the second-largest 'Discount to Net Asset Value' (78%) of the 77 companies that are tracked. With Pasona's interim results due to be released on Friday 11th, January, the Insight will look at the company's recent business performance, offer some guidelines for valuing the company and make two stock-specific recommendations. The format follows that of our recent Insight on GMO Internet. 

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

There are seven stocks which were promoted/reassigned from TSE2, MOTHERS, and JASDAQ in November 2018 leading to the same seven stocks being included in TOPIX at the end of December. 
A couple are decently largecap. Most are smaller.
A good question to ask when looking at these stocks might be... What Really Happens Around TOPIX Inclusions?
Having traded them for much of the last 20yrs, I had my hypotheses, and had done studies over the years for my own purposes, but I had not done a study recently.  To check my personal hypotheses I tested 340+ TOPIX inclusions over the past five years. 
There are patterns to the history of trading these events which are worth a look. Some of the patterns are reasonably interesting.

There are seven stocks which were promoted/reassigned from TSE2, MOTHERS, and JASDAQ in November 2018 leading to the same seven stocks being included in TOPIX at the end of December. 
A couple are decently largecap. Most are smaller.
A good question to ask when looking at these stocks might be... What Really Happens Around TOPIX Inclusions?
Having traded them for much of the last 20yrs, I had my hypotheses, and had done studies over the years for my own purposes, but I had not done a study recently.  To check my personal hypotheses I tested 340+ TOPIX inclusions over the past five years. 
There are patterns to the history of trading these events which are worth a look. Some of the patterns are reasonably interesting.

Historical TOPIX Inclusions:  How Do They Do Around Inclusion Date?

On 21 November, the TSE announced that it was reassigning then TSE2-listed <a href="https://www.smartkarma.com/entities/14502" target="_blank" data-smartkarma-citation="entities:14502:1">Benefit One Inc (2412 JP)</a> to the TSE's First Section and the company <a href="https://corp.benefit-one.co.jp/IR/news/pdf/2018/20181121.pdf" target="_blank">confirmed</a> the news. Exactly 3 months prior to that, the company had <a href="https://corp.benefit-one.co.jp/IR/news/pdf/2018/20180821.pdf" target="_blank">announced</a> that it had applied to the TSE for such reassignment. This was after a May 7th <a href="https://corp.benefit-one.co.jp/IR/pressrelease/pdf/2018/20180507_5.pdf" target="_blank">announcement</a> accompanying its FY2017 results that it planned to apply for such reassignment. The news that the company made it to the TSE First Section is well-signalled, and it will surprise nobody.This is a reasonably "large small cap" company (¥250 bn market cap at Thursday's close) TOPIX inclusion.<h2>The TOPIX Inclusion</h2>TSE1 assignment would trigger inclusion into the TOPIX Index. Based on the TOPIX Index Methodology (p7 of the <a href="http://www.jpx.co.jp/english/markets/indices/line-up/files/e_cal_16_Divf.pdf" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://www.jpx.co.jp/english/markets/indices/line-up/files/e_cal_16_Divf.pdf&amp;source=gmail&amp;ust=1543503062935000&amp;usg=AFQjCNHDJWz6VJo05ccZbBI-c-J0OahTDg">TOPIX Index Guidebook</a>), inclusion will be on the last business day on the month following entrance into the First Section. If the company enters TSE 1 in November an inclusion event can be expected at the end of December 2018 (the close of the 27th).

On 21 November, the TSE announced that it was reassigning then TSE2-listed Benefit One Inc (2412 JP) to the TSE's First Section and the company confirmed the news. Exactly 3 months prior to that, the company had announced that it had applied to the TSE for such reassignment. This was after a May 7th announcement accompanying its FY2017 results that it planned to apply for such reassignment. The news that the company made it to the TSE First Section is well-signalled, and it will surprise nobody.This is a reasonably "large small cap" company (¥250 bn market cap at Thursday's close) TOPIX inclusion.The TOPIX InclusionTSE1 assignment would trigger inclusion into the TOPIX Index. Based on the TOPIX Index Methodology (p7 of the TOPIX Index Guidebook), inclusion will be on the last business day on the month following entrance into the First Section. If the company enters TSE 1 in November an inclusion event can be expected at the end of December 2018 (the close of the 27th). 

Benefit One (2412 JP) : Big TSE1 Move and TOPIX Inclusion

Japan

Benefit One Inc. provides outsourcing services to major corporations in Japan. The Company provides a variety of benefit programs such as leisure, education, child care, nursing care and meal services for employees of the client companies.

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Benefit One Inc (2412 JP)

Japan: Relative Price Scores - Overbought and Oversold Companies - Calling 'Tops' & 'Bottoms'

RELATIVE PRICE SCORE - The Relative Price Score (RPS) measures stock price performance relative to TOPIX and is calculated by comparing the...

Campbell Gunn

Pasona : Interim Update - Still More Upside

INTERIM UPDATE - Pasona Group (2168 JP) released their second-quarter results on January 11th. This Insight updates our recent Insight Pasona...

Campbell Gunn

Pasona Non-Grata

PASONA NON-GRATASource: Japan AnalyticsROUND TRIP - Temporary staffing company Pasona (2168 JP)'s shares have completed a year-long 'round trip'...

Campbell Gunn

Historical TOPIX Inclusions: How Do They Do Around Inclusion Date?

There are seven stocks which were promoted/reassigned from TSE2, MOTHERS, and JASDAQ in November 2018 leading to the same seven stocks being...

Travis Lundy

Benefit One (2412 JP) : Big TSE1 Move and TOPIX Inclusion

On 21 November, the TSE announced that it was reassigning then TSE2-listed Benefit One Inc (2412 JP) to the TSE's First Section and the company...

Travis Lundy

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