'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

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/347/original/2019-04-20_09-59-40.png?1555722056" class="editor-image img-responsive" data-smartkarma-image-id="85347"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>UnCh</strong> - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/405/original/2019-04-21_07-28-03.png?1555799330" class="editor-image img-responsive" data-smartkarma-image-id="85405"></figure><div class="content-caption">Source: Investing.com</div><p><strong>CURRENCY RISK?</strong> - "UnCh" also applies to <a href="https://www.smartkarma.com/entities/22826" target="_blank" data-smartkarma-citation="entities:22826:1">JPY (USDJPY CURNCY)</a>  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/350/original/2019-04-20_10-21-58.png?1555723331" class="editor-image img-responsive" data-smartkarma-image-id="85350"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>VTR</strong> - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/381/original/2019-04-20_14-34-11.png?1555738458" class="editor-image img-responsive" data-smartkarma-image-id="85381"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>VOLUME SCORE TIMELINE</strong> - Volumes have been highest in the <strong>Internet</strong>, <strong>Retail</strong>, and<strong> Telecoms</strong> sectors, while the <strong>Materials</strong>,<strong> Transportation</strong>, <strong>Utilities</strong> and<strong> Real Estate</strong> Sectors have seen the lowest.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/352/original/2019-04-20_10-29-59.png?1555723806" class="editor-image img-responsive" data-smartkarma-image-id="85352"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>LOWS &gt; HIGHS</strong> - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/363/original/2019-04-20_12-34-06.png?1555731278" class="editor-image img-responsive" data-smartkarma-image-id="85363"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>DRIFTING LOWER</strong> - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/384/original/2019-04-20_17-30-47.png?1555749055" class="editor-image img-responsive" data-smartkarma-image-id="85384"></figure><div class="content-caption">Source: Japan Analytics <p></p>
</div><p><strong>MIND THE GAP</strong> - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/435/original/File%202019-04-21%2015%2055%2018.jpeg?1555829876" class="editor-image img-responsive" data-smartkarma-image-id="85435"></figure><div class="content-caption">Source: Bank of America Merrill Lynch</div><p><strong>GLOBAL WAVE</strong> - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/378/original/2019-04-20_14-00-43.png?1555736454" class="editor-image img-responsive" data-smartkarma-image-id="85378"></figure><p><strong>FORECASTS LEADING EARNINGS LOWER</strong> - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/379/original/2019-04-20_14-04-23.png?1555736670" class="editor-image img-responsive" data-smartkarma-image-id="85379"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>INTERIM LEADING ANNUAL LOWER</strong> -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   </p><p>In the <strong>DETAIL</strong> section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/14191" target="_blank" data-smartkarma-citation="entities:14191:1">Koshidaka (2157 JP)</a>, <a href="https://www.smartkarma.com/entities/2765" target="_blank" data-smartkarma-citation="entities:2765:1">Ryohin Keikaku (7453 JP)</a>, <strong>Drugstores</strong>, <a href="https://www.smartkarma.com/entities/237" target="_blank" data-smartkarma-citation="entities:237:1">Daiwa House (1925 JP)</a>, <strong>Toyota Parts companies</strong>, and <a href="https://www.smartkarma.com/entities/2" target="_blank" data-smartkarma-citation="entities:2:1">Yamato Holdings (9064 JP)</a>.</p>

Source: Japan AnalyticsUnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  Source: Investing.comCURRENCY RISK? - "UnCh" also applies to JPY (USDJPY CURNCY)  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   Source: Japan AnalyticsVTR - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.Source: Japan AnalyticsVOLUME SCORE TIMELINE - Volumes have been highest in the Internet, Retail, and Telecoms sectors, while the Materials, Transportation, Utilities and Real Estate Sectors have seen the lowest.Source: Japan AnalyticsLOWS &gt; HIGHS - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. Source: Japan AnalyticsDRIFTING LOWER - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   Source: Japan Analytics 
MIND THE GAP - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.Source: Bank of America Merrill LynchGLOBAL WAVE - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.FORECASTS LEADING EARNINGS LOWER - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.Source: Japan AnalyticsINTERIM LEADING ANNUAL LOWER -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on Koshidaka (2157 JP), Ryohin Keikaku (7453 JP), Drugstores, Daiwa House (1925 JP), Toyota Parts companies, and Yamato Holdings (9064 JP).

🇯🇵 Japan • Fortnightly Update - "UnCh"

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Equity Bottom-Up

<p>The supermarket sector is the most fragmented and uncompetitive of all retail sectors, a situation encouraged by major suppliers and not ideal for consumers.</p>
<p>Despite some effort from the likes of Aeon, consolidation has failed to materialise beyond a few in-group mergers.</p>
<p>Yet pressure on supermarkets to consolidate has been building due to depopulation in the regions, competitive pressures from other food retailers such as convenience stores and drugstore chains, as well as the emerging online food services.</p>
<p>Change is now coming. The biggest industry consolidation yet was announced last month, a precedent-setting alliance between three major supermarkets, <a href="https://www.smartkarma.com/entities/7580" target="_blank" data-smartkarma-citation="entities:7580:1">Arcs Co Ltd (9948 JP)</a>, <a href="https://www.smartkarma.com/entities/2256" target="_blank" data-smartkarma-citation="entities:2256:1">Valor Holdings (9956 JP)</a> and <a href="https://www.smartkarma.com/entities/7435" target="_blank" data-smartkarma-citation="entities:7435:1">Retail Partners (8167 JP)</a>, carving up a large chunk of the country into three regional fiefdoms.</p>

The supermarket sector is the most fragmented and uncompetitive of all retail sectors, a situation encouraged by major suppliers and not ideal for consumers.
Despite some effort from the likes of Aeon, consolidation has failed to materialise beyond a few in-group mergers.
Yet pressure on supermarkets to consolidate has been building due to depopulation in the regions, competitive pressures from other food retailers such as convenience stores and drugstore chains, as well as the emerging online food services.
Change is now coming. The biggest industry consolidation yet was announced last month, a precedent-setting alliance between three major supermarkets, Arcs Co Ltd (9948 JP), Valor Holdings (9956 JP) and Retail Partners (8167 JP), carving up a large chunk of the country into three regional fiefdoms.

Arcs, Valor and Retail Partners Form First Nationwide Supermarket Alliance

Thematic (Sector/Industry)

<p>Fashion retailers had a much better year in 2017-18 as the apparel and accessories market expanded 2.2% after two years of market contraction.</p>
<p>Recent growth has mostly benefited the speciality store and online sectors, but last year department stores also improved, and even the odd GMS chain enjoyed the balmier climate.</p>
<p>As a result, department store market share among the top 100 apparel retailers – which account for 70% of the market – rose for the first time in 15 years.</p>
<p>The market share of the top 100 fell due to better sales at small retailers and independents.</p>
<p>Trading is still tough, however, and retailers are cautious about consumer sentiment going forward.</p>
<p>The winners though are clear to see, with companies like <a href="https://www.smartkarma.com/entities/2765" target="_blank" data-smartkarma-citation="entities:2765:1">Ryohin Keikaku (7453 JP)</a>, <a href="https://www.smartkarma.com/entities/23991" target="_blank" data-smartkarma-citation="entities:23991:1">Tokyo Base (3415 JP)</a>, Mash Holdings and <a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO Inc (3092 JP)</a> pushing well ahead of the sector year after year.</p>
<p>The following is a comprehensive review of the Japanese apparel/fashion market in FY2017, and the winners within it.</p>

Fashion retailers had a much better year in 2017-18 as the apparel and accessories market expanded 2.2% after two years of market contraction.
Recent growth has mostly benefited the speciality store and online sectors, but last year department stores also improved, and even the odd GMS chain enjoyed the balmier climate.
As a result, department store market share among the top 100 apparel retailers – which account for 70% of the market – rose for the first time in 15 years.
The market share of the top 100 fell due to better sales at small retailers and independents.
Trading is still tough, however, and retailers are cautious about consumer sentiment going forward.
The winners though are clear to see, with companies like Ryohin Keikaku (7453 JP), Tokyo Base (3415 JP), Mash Holdings and ZOZO Inc (3092 JP) pushing well ahead of the sector year after year.
The following is a comprehensive review of the Japanese apparel/fashion market in FY2017, and the winners within it.

The Winners in Japanese Fashion Retailing

<p>JapanConsuming’s retail ranking for FY2017 has now been compiled, and the results show that the retail industry enjoyed another extremely good year in FY2017.<span class="Apple-converted-space"> </span></p>
<p>There are now 79 companies with sales of ¥250 billion or more, including franchise operators and holding companies, and overall sales grew by 4.5%, way ahead of the 1.9% growth in retail sales overall, showing how much the bigger businesses are outperforming the rest of the sector, and how quickly they are eating up market share.</p>
<p>What follows is a comprehensive review of the major developments, focusing on the two key trends of e-commerce and greater group concentration, with an analysis of each of the major format sectors in the ranking.</p>
<p>It’s a long read but provides a complete and concise summary of both winners and losers, and the key trends in the retail sector at the moment.</p>

JapanConsuming’s retail ranking for FY2017 has now been compiled, and the results show that the retail industry enjoyed another extremely good year in FY2017. 
There are now 79 companies with sales of ¥250 billion or more, including franchise operators and holding companies, and overall sales grew by 4.5%, way ahead of the 1.9% growth in retail sales overall, showing how much the bigger businesses are outperforming the rest of the sector, and how quickly they are eating up market share.
What follows is a comprehensive review of the major developments, focusing on the two key trends of e-commerce and greater group concentration, with an analysis of each of the major format sectors in the ranking.
It’s a long read but provides a complete and concise summary of both winners and losers, and the key trends in the retail sector at the moment.

Retail Ranking FY2017-18: Winners and Losers in Japanese Retailing

<p><strong>RELATIVE PRICE SCORE SHORT PORTFOLIOS</strong> - Our recent insight Japan: Most Overbought &amp; Most Oversold - The Relative Price Score introduced our methodology for identifying overbought and oversold outliers based on their Relative Price Score (RPS).  Following on from our "Long Portfolios" insight, we will now focus on generating short ideas based on changes in the monthly closing Relative Price Scores.</p><p><strong>HISTORICAL SIMULATION</strong> - Simulations of trading strategies should be viewed with caution, and the usual caveats apply to what follows. 78% of the 287 'trades' generated since 1992 would have been profitable if held and then sold after twelve months. The average 'outcome' for the 26-year period was a 'gain' of 30%. After the cost of borrowing and slippage are subtracted, a 'result' of 20-25% would be more realistic.  In five periods (1993, 2010, 2012 and 20171H) the average gain before borrowing costs was less than 10%.  In 2016 the strategy lost 3% before costs.  As with all mechanical trading rules, they are times when they cease to work. From August 2016 to November 2017, the number of 'losing' trades outweighs 'winning' trades by 27 to 21. During this period, the TOPIX index rose by 39% and so a small single digit 'loss' from shorting is acceptable. However, we would caution that this strategy has been and will, no doubt, again be fallible.</p><div class="content-highlight">
<p style="text-align: center;"><strong>THE 2014 PORTFOLIO</strong></p>
<ul>
<li>22 'positions' in 18 companies produced an average 'return' of 26% before borrowing costs with only three positions stopped out.</li>
<li>The most successful positions were in <a href="https://www.smartkarma.com/entities/18683" target="_blank" data-smartkarma-citation="entities:18683:1">Nihon Trim (6788 JP)</a>, <a href="https://www.smartkarma.com/entities/5568" target="_blank" data-smartkarma-citation="entities:5568:1">Zuiko (6279 JP)</a> and <a href="https://www.smartkarma.com/entities/11666" target="_blank" data-smartkarma-citation="entities:11666:1">D.Western Therapeutics (4576 JP)</a>.</li>
<li>
<a href="https://www.smartkarma.com/entities/3322" target="_blank" data-smartkarma-citation="entities:3322:1">Micronics Japan (6871 JP)</a> is a good illustration of the need for a stop-loss discipline but also the common feature of overbought stocks to have a second 'wind' within a year of the first set-up.</li>
</ul>
</div><div class="content-highlight">
<p style="text-align: center;"><strong>THE 2015 PORTFOLIO</strong></p>
<ul>
<li>11 'positions' in 10 companies produced an average 'return' of 25% with three positions stopped out.</li>
<li>
<a href="https://www.smartkarma.com/entities/15064" target="_blank" data-smartkarma-citation="entities:15064:1">Toyo Tire &amp; Rubber (5105 JP)</a> was another example of a double top.</li>
</ul>
</div><p></p><div class="content-highlight">
<p style="text-align: center;"><strong>THE 2016 PORTFOLIO</strong></p>
<ul>
<li>2016 was the worst year for this strategy in the 28-year period of the simulation. 20 of 41 trades were stopped out and only eight trades in the final quarter added value. For the period, the average 12-month result was a 3% loss before borrowing costs - which compares with a 2016 loss of 2% for the TOPIX Index.</li>
<li>
<a href="https://www.smartkarma.com/entities/10372" target="_blank" data-smartkarma-citation="entities:10372:1">Ezaki Glico (2206 JP)</a> is an example of the persistence of stocks in the overbought zone during this period - in this case with a triple top.</li>
<li>The strategy can also be helpful in identifying trends in sectors and peer groups which can lead to action in other stocks and overall sector positioning - the large number of biotechnology, pharmaceutical and food companies in the 2016 list coincided with multi-year relative peaks in those sectors.</li>
</ul>
</div><p></p><div class="content-highlight">
<p style="text-align: center;"><strong>THE 2017/2018 PORTFOLIOS</strong></p>
<ul>
<li>At this point, most risk control reviews would have shut down trading.  However, performance gradually improved during 2017 despite TOPIX gaining 20%</li>
<li>The 20171H portfolio closed out with a 9% 'return' before costs and four out of seven positions adding value.</li>
<li>There are currently 36 open positions, and 11 stopped out positions with an average return before costs of 8%</li>
<li>The most successful open positions are <a href="https://www.smartkarma.com/entities/3453" target="_blank" data-smartkarma-citation="entities:3453:1">Fukui Computer (9790 JP)</a> and <a href="https://www.smartkarma.com/entities/16888" target="_blank" data-smartkarma-citation="entities:16888:1">Ivy Cosmetics (4918 JP)</a>
</li>
<li>Of the larger capitalisation open positions, a number have been covered by Smartkarma insight providers:- <ul>
<li>
<a href="https://www.smartkarma.com/entities/26074" target="_blank" data-smartkarma-citation="entities:26074:1">Macnica Fuji Electronics (3132 JP)</a> / <a href="https://www.smartkarma.com/insights/macnica-fuji-electronics-3132-jp-fye-update-recommendation-still-an-avoid" target="_blank" data-smartkarma-citation="insights:19959">STILL AN AVOID</a>
</li>
<li>
<a href="https://www.smartkarma.com/entities/10238" target="_blank" data-smartkarma-citation="entities:10238:1">Harmonic Drive Systems (6324 JP)</a> / <a href="https://www.smartkarma.com/insights/harmonic-drive-4q-margins-look-weak-but-this-is-a-one-off-still-expensive-though" target="_blank" data-smartkarma-citation="insights:20261">Q4 Margins Look Weak - Still Expensive Though</a>
</li>
<li>
<a href="https://www.smartkarma.com/entities/13173" target="_blank" data-smartkarma-citation="entities:13173:1">Izumi (8273 JP)</a> / <a href="https://www.smartkarma.com/insights/izumi-and-seven-i-join-forces-to-foil-aeon" target="_blank" data-smartkarma-citation="insights:20012">Izumi and Seven &amp; I Join Forces to Foil Aeon</a>
</li>
</ul>
</li>
</ul>
<p>The most recently added position is boiler-maker <a href="https://www.smartkarma.com/entities/20185" target="_blank" data-smartkarma-citation="entities:20185:1">Miura (6005 JP)</a> which has seen an exceptional period of profitability but is at an extreme valuation relative to its history. At a current TTM EV/OP of 20.5x, the stock has 34% downside to a no-growth valuation.</p>
</div>

RELATIVE PRICE SCORE SHORT PORTFOLIOS - Our recent insight Japan: Most Overbought &amp; Most Oversold - The Relative Price Score introduced our methodology for identifying overbought and oversold outliers based on their Relative Price Score (RPS).  Following on from our "Long Portfolios" insight, we will now focus on generating short ideas based on changes in the monthly closing Relative Price Scores.HISTORICAL SIMULATION - Simulations of trading strategies should be viewed with caution, and the usual caveats apply to what follows. 78% of the 287 'trades' generated since 1992 would have been profitable if held and then sold after twelve months. The average 'outcome' for the 26-year period was a 'gain' of 30%. After the cost of borrowing and slippage are subtracted, a 'result' of 20-25% would be more realistic.  In five periods (1993, 2010, 2012 and 20171H) the average gain before borrowing costs was less than 10%.  In 2016 the strategy lost 3% before costs.  As with all mechanical trading rules, they are times when they cease to work. From August 2016 to November 2017, the number of 'losing' trades outweighs 'winning' trades by 27 to 21. During this period, the TOPIX index rose by 39% and so a small single digit 'loss' from shorting is acceptable. However, we would caution that this strategy has been and will, no doubt, again be fallible.
THE 2014 PORTFOLIO

22 'positions' in 18 companies produced an average 'return' of 26% before borrowing costs with only three positions stopped out.
The most successful positions were in Nihon Trim (6788 JP), Zuiko (6279 JP) and D.Western Therapeutics (4576 JP).

Micronics Japan (6871 JP) is a good illustration of the need for a stop-loss discipline but also the common feature of overbought stocks to have a second 'wind' within a year of the first set-up.


THE 2015 PORTFOLIO

11 'positions' in 10 companies produced an average 'return' of 25% with three positions stopped out.

Toyo Tire &amp; Rubber (5105 JP) was another example of a double top.


THE 2016 PORTFOLIO

2016 was the worst year for this strategy in the 28-year period of the simulation. 20 of 41 trades were stopped out and only eight trades in the final quarter added value. For the period, the average 12-month result was a 3% loss before borrowing costs - which compares with a 2016 loss of 2% for the TOPIX Index.

Ezaki Glico (2206 JP) is an example of the persistence of stocks in the overbought zone during this period - in this case with a triple top.
The strategy can also be helpful in identifying trends in sectors and peer groups which can lead to action in other stocks and overall sector positioning - the large number of biotechnology, pharmaceutical and food companies in the 2016 list coincided with multi-year relative peaks in those sectors.


THE 2017/2018 PORTFOLIOS

At this point, most risk control reviews would have shut down trading.  However, performance gradually improved during 2017 despite TOPIX gaining 20%
The 20171H portfolio closed out with a 9% 'return' before costs and four out of seven positions adding value.
There are currently 36 open positions, and 11 stopped out positions with an average return before costs of 8%
The most successful open positions are Fukui Computer (9790 JP) and Ivy Cosmetics (4918 JP)

Of the larger capitalisation open positions, a number have been covered by Smartkarma insight providers:- 

Macnica Fuji Electronics (3132 JP) / STILL AN AVOID


Harmonic Drive Systems (6324 JP) / Q4 Margins Look Weak - Still Expensive Though


Izumi (8273 JP) / Izumi and Seven &amp; I Join Forces to Foil Aeon




The most recently added position is boiler-maker Miura (6005 JP) which has seen an exceptional period of profitability but is at an extreme valuation relative to its history. At a current TTM EV/OP of 20.5x, the stock has 34% downside to a no-growth valuation.


Japan: Relative Price Score Short Portfolios

Japan

IZUMI CO., LTD. operates shopping centers mainly in the Chugoku area, selling food products, clothing, and household utensils.  The Company also operates real estate business and credit card services.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Izumi Co Ltd (8273 JP)

🇯🇵 Japan • Fortnightly Update - "UnCh"

UnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading...

Campbell Gunn

Arcs, Valor and Retail Partners Form First Nationwide Supermarket Alliance

The supermarket sector is the most fragmented and uncompetitive of all retail sectors, a situation encouraged by major suppliers and not ideal for...

Michael Causton

The Winners in Japanese Fashion Retailing

Fashion retailers had a much better year in 2017-18 as the apparel and accessories market expanded 2.2% after two years of market...

Michael Causton

Retail Ranking FY2017-18: Winners and Losers in Japanese Retailing

JapanConsuming’s retail ranking for FY2017 has now been compiled, and the results show that the retail industry enjoyed another extremely good year...

Michael Causton

Japan: Relative Price Score Short Portfolios

RELATIVE PRICE SCORE SHORT PORTFOLIOS - Our recent insight Japan: Most Overbought & Most Oversold - The Relative Price Score introduced our...

Campbell Gunn

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52-week Range

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