'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/176/175/original/2020-12-03_05-39-01.png?1606941555" class="editor-image img-responsive" data-smartkarma-image-id="176175"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics </div></section><div><p><strong>FOUR QUADRANTS PICKS</strong> - Our recent series of Insights covering companies that are extreme outliers in our Relative Price Score/Results &amp; Revision Score matrix has featured the following seven companies:-  </p></div><div>
<ul style="list-style-type: disc;">
<li>
<strong>CONTRARIAN BUYS</strong> - <a href="https://www.smartkarma.com/entities/nikon-corp" target="_blank" data-smartkarma-citation="entities:7117:1" rel="noopener">Nikon (7731 JP)</a>, <a href="https://www.smartkarma.com/entities/fuji-media-holdings-inc" target="_blank" data-smartkarma-citation="entities:3191:1" rel="noopener">Fuji Media (4676 JP)</a>, <a href="https://www.smartkarma.com/entities/east-japan-railway-co" target="_blank" data-smartkarma-citation="entities:14271:1" rel="noopener">East Japan Railway (9020 JP)</a> </li>
<li>
<strong>CONTRARIAN SELLS</strong> - <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 (2413 JP)</a>, <a href="https://www.smartkarma.com/entities/disco-corp" target="_blank" data-smartkarma-citation="entities:15817:1" rel="noopener">DISCO (6146 JP)</a> </li>
<li>
<strong>TURNAROUND BUYS</strong> - <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> </li>
<li>
<strong>EX-GROWTH SELLS</strong> - <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" data-smartkarma-citation="entities:12933:1" rel="noopener">Kao  (4452 JP)</a> </li>
</ul>
<p><strong>2021 HIGH CONVICTION COLLECTION</strong> - For Smartkarma's '2021 High Conviction Collection' we have chosen one of the seven to be our selection. Given the lack of short ideas so far - only two and both in the US - our pick, <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 (2413 JP)</a>, is the first Asian, and first Japanese, 'short' to join the Collection.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/176/209/original/2020-12-03_10-35-14.png?1606959327" class="editor-image img-responsive" data-smartkarma-image-id="176209"></figure></section><p><a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener"><strong>M3</strong></a>- M3 is the most extreme outlier of the seven stocks we have featured and was recommended as a 'Suga Growth Long in our Smartkarma Original - <a href="https://www.smartkarma.com/insights/japan-in-the-suga-era-policy-priorities-suga-stocks" target="_blank" data-smartkarma-citation="insights:43773" rel="noopener">Japan in the Suga Era - Policy Priorities &amp; 'Suga Stocks'</a>. Since then the stock has appreciated by 40% and by 10% since we published <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-sells" target="_blank" data-smartkarma-citation="insights:45725" rel="noopener">Contrarian Sells</a>, adding almost ¥2 trillion in market value M3 is Japan's fifteenth largest company with a market value of ¥6.4 trillion, despite having only ¥144 billion in trailing revenues, ¥43 billion in trailing operating income, and just ¥18 billion in trailing CITC. While valuations may be less of a concern in the momentum-driven post-COVID era, we have highlighted several areas of concern regarding the company's margin-diluting diversification, that suggest that M3's tripling in value seen in 2020 will not be repeated. <strong>M3 is our 2021 'High Conviction Sell' </strong>     </p>
</div>

Source for all charts &amp; tables: Japan Analytics FOUR QUADRANTS PICKS - Our recent series of Insights covering companies that are extreme outliers in our Relative Price Score/Results &amp; Revision Score matrix has featured the following seven companies:-  


CONTRARIAN BUYS - Nikon (7731 JP), Fuji Media (4676 JP), East Japan Railway (9020 JP) 

CONTRARIAN SELLS - M3 (2413 JP), DISCO (6146 JP) 

TURNAROUND BUYS - Softbank Corp (9434 JP) 

EX-GROWTH SELLS - Kao  (4452 JP) 

2021 HIGH CONVICTION COLLECTION - For Smartkarma's '2021 High Conviction Collection' we have chosen one of the seven to be our selection. Given the lack of short ideas so far - only two and both in the US - our pick, M3 (2413 JP), is the first Asian, and first Japanese, 'short' to join the Collection.
M3- M3 is the most extreme outlier of the seven stocks we have featured and was recommended as a 'Suga Growth Long in our Smartkarma Original - Japan in the Suga Era - Policy Priorities &amp; 'Suga Stocks'. Since then the stock has appreciated by 40% and by 10% since we published Contrarian Sells, adding almost ¥2 trillion in market value M3 is Japan's fifteenth largest company with a market value of ¥6.4 trillion, despite having only ¥144 billion in trailing revenues, ¥43 billion in trailing operating income, and just ¥18 billion in trailing CITC. While valuations may be less of a concern in the momentum-driven post-COVID era, we have highlighted several areas of concern regarding the company's margin-diluting diversification, that suggest that M3's tripling in value seen in 2020 will not be repeated. M3 is our 2021 'High Conviction Sell'      


2021 High Conviction 🇯🇵 Sell M3 (2413 JP)

Thematic (Sector/Industry)

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/082/original/2020-11-30_05-30-46.png?1606681863" class="editor-image img-responsive" data-smartkarma-image-id="175082"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics </div><p><strong>FOUR QUADRANTS</strong> - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-</p><ul style="list-style-type: disc;">
<li>
<strong>CONTRARIAN BUYS </strong>- Companies with low Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>CONTRARIAN SELLS</strong> - Companies with high Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>TURNAROUNDS</strong> - Companies with high Results &amp; Revision Scores &amp; low Relative Price Scores</li>
<li>
<strong>EX-GROWTH</strong> - Companies with low Results &amp; Revision Scores &amp; high Relative Price Scores</li>
</ul><p>In the two Contrarian quadrants and especially for Contrarian Sells, companies can remain outliers for extended periods; however profitable Contrarian Sells in the last year have been <a href="https://www.smartkarma.com/entities/taiyo-nippon-sanso-corp" target="_blank" data-smartkarma-citation="entities:15756:1" rel="noopener">Nippon Sanso (4091 JP)</a> and <a href="https://www.smartkarma.com/entities/sekisui-house-ltd" target="_blank" data-smartkarma-citation="entities:4508:1" rel="noopener">Sekisui House (1928 JP)</a>. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/185/original/2020-11-26_08-13-23.png?1606346017" class="editor-image img-responsive" data-smartkarma-image-id="174185"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/187/original/2020-11-26_08-18-21.png?1606346313" class="editor-image img-responsive" data-smartkarma-image-id="174187"></figure></section><p><strong><a href="https://www.dropbox.com/s/7b61jl02dh0pzno/2020-11-25_12-43-55.png?dl=0" target="_blank" rel="noopener">CONTRARIAN SELLS</a></strong>- In the<strong> DETAIL</strong> below, we shall review the current 'crop' of Contrarian Sells for potential opportunities. Subsequent Insights in this mini-series will look at the Turnarounds and Ex-Growth quadrants before concluding with one '2021 High Conviction' recommendation. The first Insight in the Series can be found here - <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-buys" target="_blank" data-smartkarma-citation="insights:45688" rel="noopener">Contrarian Buys</a>.</p>

Source for all charts &amp; tables: Japan Analytics FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-

CONTRARIAN BUYS - Companies with low Results &amp; Revision and Relative Price Scores

CONTRARIAN SELLS - Companies with high Results &amp; Revision and Relative Price Scores

TURNAROUNDS - Companies with high Results &amp; Revision Scores &amp; low Relative Price Scores

EX-GROWTH - Companies with low Results &amp; Revision Scores &amp; high Relative Price Scores
In the two Contrarian quadrants and especially for Contrarian Sells, companies can remain outliers for extended periods; however profitable Contrarian Sells in the last year have been Nippon Sanso (4091 JP) and Sekisui House (1928 JP). CONTRARIAN SELLS- In the DETAIL below, we shall review the current 'crop' of Contrarian Sells for potential opportunities. Subsequent Insights in this mini-series will look at the Turnarounds and Ex-Growth quadrants before concluding with one '2021 High Conviction' recommendation. The first Insight in the Series can be found here - Contrarian Buys.

🇯🇵 JAPAN • Four Quadrants - Contrarian Sells

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/867/original/2020-11-25_11-14-58.png?1606270511" class="editor-image img-responsive" data-smartkarma-image-id="173867"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div><p><strong>FOUR QUADRANTS</strong> - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-</p><ul>
<li>
<strong>CONTRARIAN BUYS</strong> - Companies with<strong> low</strong> Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>CONTRARIAN SELLS</strong> - Companies with <strong>high</strong> Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>TURNAROUNDS</strong> - Companies with<strong> high</strong> Results &amp; Revision Scores &amp; <strong>low</strong> Relative Price Scores</li>
<li>
<strong>EX-GROWTH</strong> - Companies with <strong>low</strong> Results &amp; Revision Scores &amp; <strong>high</strong> Relative Price Scores</li>
</ul><p>In the two <strong>Contrarian</strong> quadrants, companies can remain outliers for extended periods, such as <a href="https://www.smartkarma.com/entities/jfe-holdings-inc" target="_blank" data-smartkarma-citation="entities:210:1" rel="noopener">JFE (5411 JP)</a>  in Buys, <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> in Sells. The other quadrants see much more 'turnover' and van can offer profitable trading opportunities such as <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil(5938 JP)</a> in <strong>Turnarounds,</strong> and <a href="https://www.smartkarma.com/entities/ariake-japan-co-ltd" target="_blank" data-smartkarma-citation="entities:4908:1" rel="noopener">Ariake Japan (2815 JP)</a> in the <strong>Ex-Growth</strong> quadrant.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/896/original/2020-11-25_12-25-57.png?1606274769" class="editor-image img-responsive" data-smartkarma-image-id="173896"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/903/original/2020-11-25_12-56-49.png?1606276623" class="editor-image img-responsive" data-smartkarma-image-id="173903"></figure></section><p><strong><a href="https://www.dropbox.com/s/7b61jl02dh0pzno/2020-11-25_12-43-55.png?dl=0" target="_blank" rel="noopener">CONTRARIAN BUYS</a> -</strong> In the <strong>DETAIL</strong> below, we shall review the current 'crop' of Contrarian Buys for potential opportunities. Subsequent Insights in this mini-series will look into the other three quadrants before concluding with one '<em><strong>2021 High Conviction</strong></em>' recommendation. </p></section>

Source for all charts &amp; tables: Japan AnalyticsFOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-

CONTRARIAN BUYS - Companies with low Results &amp; Revision and Relative Price Scores

CONTRARIAN SELLS - Companies with high Results &amp; Revision and Relative Price Scores

TURNAROUNDS - Companies with high Results &amp; Revision Scores &amp; low Relative Price Scores

EX-GROWTH - Companies with low Results &amp; Revision Scores &amp; high Relative Price Scores
In the two Contrarian quadrants, companies can remain outliers for extended periods, such as JFE (5411 JP)  in Buys, Lasertec (6920 JP) in Sells. The other quadrants see much more 'turnover' and van can offer profitable trading opportunities such as Lixil(5938 JP) in Turnarounds, and Ariake Japan (2815 JP) in the Ex-Growth quadrant.CONTRARIAN BUYS - In the DETAIL below, we shall review the current 'crop' of Contrarian Buys for potential opportunities. Subsequent Insights in this mini-series will look into the other three quadrants before concluding with one '2021 High Conviction' recommendation. 

🇯🇵 JAPAN • Four Quadrants - Contrarian Buys

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/203/original/2020-11-17_12-24-48.png?1605583510" class="editor-image img-responsive" data-smartkarma-image-id="172203"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>
<p><strong>BRIGHTER, LATER</strong> - Forecast Aggregate Net Income for the universe of Japanese listed companies ended the quarter, higher than three months ago by ¥1.2 trillion. As a result, the market's forward multiple is unchanged at 31 times, despite a 7% rise in market capitalisation. Although this 'season' was the best in two years in terms of forecast profits, trailing earnings are still falling, by almost ¥3 trillion in the case of operating income. Much of the market optimism rests on a Japan experiencing a mild COVID winter and the impact of the incoming Biden administration's policy pronouncements on the US dollar. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/219/original/2020-11-17_13-33-54.png?1605587647" class="editor-image img-responsive" data-smartkarma-image-id="172219"></figure></section><p><strong>5.2% TTM OPERATING MARGINS</strong> - Aggregate Operating Income has declined by a third year-on-year on a 10% decline in revenues. The good news is that the pace of decline is slowing. Nevertheless, all of the Abe-era gains in earnings have now been unwound.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/230/original/2020-11-17_13-47-49.png?1605588488" class="editor-image img-responsive" data-smartkarma-image-id="172230"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/394/original/2020-11-18_07-24-55.png?1605651921" class="editor-image img-responsive" data-smartkarma-image-id="172394"></figure></section><p><strong>4.8% FORECAST OPERATING MARGINS</strong> - Operating margins are forecast to contract further over the next five months to 4.8%. Forecast revenues and operating income are both 3% lower than three months ago, the slowest rate of attrition in three quarters. The current market euphoria, which has taken total capitalisation to within 3% of the pre-COVID high is implying that the next 'print' of this data series, will be positive.    </p></section><section class="figure"></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/256/original/2020-11-17_14-22-29.png?1605590564" class="editor-image img-responsive" data-smartkarma-image-id="172256"></figure></section><p><strong>POSITIVE MOMENTUM</strong> - The sharp recovery in earnings momentum, which the market has been discounting is now materialising. Our Forecast/Revision Score has returned to March levels while the trailing Results Score has bottomed out well above the low of 2009. </p>
<section class="figure"><section class="figure"></section><div class="content-highlight"><p>In the <strong>DETAIL</strong> section below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. </p></div></section></section>

Source for all charts &amp; tables: Japan Analytics
BRIGHTER, LATER - Forecast Aggregate Net Income for the universe of Japanese listed companies ended the quarter, higher than three months ago by ¥1.2 trillion. As a result, the market's forward multiple is unchanged at 31 times, despite a 7% rise in market capitalisation. Although this 'season' was the best in two years in terms of forecast profits, trailing earnings are still falling, by almost ¥3 trillion in the case of operating income. Much of the market optimism rests on a Japan experiencing a mild COVID winter and the impact of the incoming Biden administration's policy pronouncements on the US dollar. 
5.2% TTM OPERATING MARGINS - Aggregate Operating Income has declined by a third year-on-year on a 10% decline in revenues. The good news is that the pace of decline is slowing. Nevertheless, all of the Abe-era gains in earnings have now been unwound.
4.8% FORECAST OPERATING MARGINS - Operating margins are forecast to contract further over the next five months to 4.8%. Forecast revenues and operating income are both 3% lower than three months ago, the slowest rate of attrition in three quarters. The current market euphoria, which has taken total capitalisation to within 3% of the pre-COVID high is implying that the next 'print' of this data series, will be positive.    POSITIVE MOMENTUM - The sharp recovery in earnings momentum, which the market has been discounting is now materialising. Our Forecast/Revision Score has returned to March levels while the trailing Results Score has bottomed out well above the low of 2009. 
In the DETAIL section below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. 

🇯🇵 JAPAN • IT’S A WRAP - Autumn 2020 Results & Revisions Review

<p style="text-align: center;"><strong>• FORWARD NET INCOME &lt;¥20 TRILLION •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/639/original/2020-11-01_11-41-42.png?1604198522" class="editor-image img-responsive" data-smartkarma-image-id="168639"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></section><p><strong>&lt;¥20T</strong> - Aggregate earnings for Japan's listed companies are in their eighth successive quarter of decline. Forecast net income for the year ended December-to-March is now below ¥20 trillion and 60% lower than the 2019 peak of ¥48.5 trillion.  Despite the recent correction, the forward market multiple is at a new post-GFC high. On a more optimistic note, for many larger capitalisation companies, there has been a quarter-on-quarter improvement in sales and operating income although the year-on-year changes are still negative. As a result, our momentum-based Results Score and Forecast/Revision Score have both turned upwards.</p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/640/original/2020-11-01_13-06-28.png?1604203602" class="editor-image img-responsive" data-smartkarma-image-id="168640"></figure></section><p><strong>CAVEATS</strong> - Curbing any enthusiasm embedded in the previous sentence, would however note:-</p>
<ul>
<li>The upturn in momentum is concentrated mainly in large-cap companies which are over-represented in our data series due to cap-weighting. Significant cost-cutting has helped improve margins but has also reduced the revenues of smaller companies further down the supply chain. This divergence will be covered in an upcoming Insight.</li>
<li>The resurgence of COVID-19 and the daily new peaks in confirmed cases has not yet spread to Japan. However, with much of Europe re-entering 'lockdown', we expect the current quarter will not repeat the upturn seen in the second, and therefore, many companies will not meet their full-year targets many of which were recently revised up.</li>
<li>As a result of central bank liquidity creation, much of the recovery in earning that will occur over the next several years has already been discounted in share prices. Although the policy prescriptions that we noted in<a href="https://www.smartkarma.com/insights/japan-in-the-suga-era-policy-priorities-suga-stocks" target="_blank" data-smartkarma-citation="insights:43773" rel="noopener"> Japan in the Suga Era</a> will benefit many areas of the economy, Japan remains overweighted in industries that face significant disruption and disintermediation.</li>
</ul>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/670/original/2020-11-01_14-52-47.png?1604209987" class="editor-image img-responsive" data-smartkarma-image-id="168670"></figure></section><section class="figure"></section><p><strong>BoJ</strong> -  Although the amounts are 30% smaller, this week was the first time since the second week of May that the Bank of Japan has purchased ETFs three days in a row. Despite growing <a href="http://www.asahi.com/ajw/articles/13863217" target="_blank" rel="noopener">attention</a> being paid to the scale and breadth of public sector ownership of Japanese equities, BoJ Governor Kuroda has PM Suga's support for continued interventions. We expect the cumulative total purchases to reach 6% of Total Market Value before the end of the fiscal year. </p></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/672/original/2020-11-01_15-05-07.png?1604210720" class="editor-image img-responsive" data-smartkarma-image-id="168672"></figure></section><hr><p style="text-align: center;"><strong>• MARKET TECHNICALS •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/678/original/2020-11-01_15-15-20.png?1604211336" class="editor-image img-responsive" data-smartkarma-image-id="168678"></figure></section><p><strong>14-DAY RSI</strong> - The Relative Strength Index is close to a new eight-month low but is yet to reach the 'buying-zone' of less than 25.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/681/original/2020-11-01_15-58-15.png?1604213912" class="editor-image img-responsive" data-smartkarma-image-id="168681"></figure></section><p><strong>25-DAY TORAKU</strong> - This advance/decline indicator is suggesting that a selling climax is likely to occur this month. Panic lows are at levels below 70 - the COVID-19 low of 45 was the lowest level in over twenty years.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/682/original/2020-11-01_16-09-21.png?1604214610" class="editor-image img-responsive" data-smartkarma-image-id="168682"></figure></section><p><strong>HIGH-LOW %</strong> - Having only just turned negative, this ratio is a long way from the 10-15% level needed to form a buy signal.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/683/original/2020-11-01_16-12-30.png?1604214765" class="editor-image img-responsive" data-smartkarma-image-id="168683"></figure></section><p><strong>MCCLELLAN SUMMATION</strong> - Similarly, the McClellan A/D Summation is neutral and well above the -4,000 buying zone.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/684/original/2020-11-01_16-15-15.png?1604214933" class="editor-image img-responsive" data-smartkarma-image-id="168684"></figure></section><p><a href="https://www.dropbox.com/s/kwe54zk9yrxmtan/2020-11-01_16-15-15.png?dl=0" target="_blank" rel="noopener">MOVING AVERAGES</a> -  Lastly, the Total Market Value is approaching the support level of the 200-Day moving average. If breached, a 50-Day/200-Day negative crossover is likely, extending this correction to below ¥600 trillion.</p><hr><p style="text-align: center;"><strong>• SECTOR RESULTS &amp; REVISION SCORES TIMELINE •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/686/original/2020-11-01_16-26-10.png?1604215582" class="editor-image img-responsive" data-smartkarma-image-id="168686"></figure></section><section class="figure"></section><p><strong>TIMELINE</strong> - The results 'season' is now in full 'swing'. To date, the Sectors with the strongest earnings momentum are <strong>Machinery</strong>, <strong>Retail</strong>,<strong> Electrical Equipmen</strong>t, and <strong>Other Materials</strong>. The weakest are <strong>Other Commerical Products</strong>,<strong> Information Technology</strong>, <strong>Real Estate</strong>, and <strong>Energy</strong>. Only four Sectors have a positive Score, lead by<strong> Internet Content &amp; Services</strong>. </p><hr><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p><div><p>Our best and worst pairings from Friday's announcements are <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 Inc (2413 JP)</a> and <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> for the best and <a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis (4927 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui (8031 JP)</a> for the worst. </p></div><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/688/original/2020-11-01_16-47-56.png?1604216889" class="editor-image img-responsive" data-smartkarma-image-id="168688"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/689/original/2020-11-01_16-53-04.png?1604217196" class="editor-image img-responsive" data-smartkarma-image-id="168689"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/690/original/2020-11-01_16-58-22.png?1604217564" class="editor-image img-responsive" data-smartkarma-image-id="168690"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/691/original/2020-11-01_16-59-54.png?1604217609" class="editor-image img-responsive" data-smartkarma-image-id="168691"></figure></section><div>
<hr>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
<p style="text-align: left;">Results are evenly split between positive and neutral, however, TTM revenues are still falling by 5% and operating margins are on average 1.5 points lower. 60% of annual revisions are negative and the average change in score is a decline of 4 points.</p>
</div>
<hr>
<div><p style="text-align: center;"><strong>407 Quarterly Results</strong></p></div>
<div><ul style="list-style-type: disc;">
<li><p><strong>Results Score:</strong> 42% Positive / 6% Neutral / 42% Negative</p></li>
<li><p><strong>Average Results Score Change:</strong> -1.2 points</p></li>
<li><p><strong>Average % Change in Revenue:</strong> -7.9% Quarter YoY / -5.2% Rolling TTM YoY </p></li>
<li><p><strong>Average Operating Profit Margin Change</strong>: -1.5ppt</p></li>
<li><p><strong>Percentage Making Quarterly Losses:</strong> 20%</p></li>
</ul></div>
<hr>
<div><p style="text-align: center;"><strong>197 Annual • 45 Interim Forecasts/Revisions</strong></p></div>
<div><ul style="list-style-type: disc;">
<li><p><strong>Annual Forecast/Revision Score:</strong> 31% Positive / 9% Neutral / 59% Negative</p></li>
<li><p><strong>Interim Forecast/Revision Score Change:</strong> 47% Positive / 11% Neutral / 42% Negative</p></li>
<li><p><strong>Average Forecast/Revision Score Change:</strong> -4.0 points</p></li>
</ul></div></section>

• FORWARD NET INCOME &lt;¥20 TRILLION •Source for all charts &amp; tables: Japan Analytics&lt;¥20T - Aggregate earnings for Japan's listed companies are in their eighth successive quarter of decline. Forecast net income for the year ended December-to-March is now below ¥20 trillion and 60% lower than the 2019 peak of ¥48.5 trillion.  Despite the recent correction, the forward market multiple is at a new post-GFC high. On a more optimistic note, for many larger capitalisation companies, there has been a quarter-on-quarter improvement in sales and operating income although the year-on-year changes are still negative. As a result, our momentum-based Results Score and Forecast/Revision Score have both turned upwards.CAVEATS - Curbing any enthusiasm embedded in the previous sentence, would however note:-

The upturn in momentum is concentrated mainly in large-cap companies which are over-represented in our data series due to cap-weighting. Significant cost-cutting has helped improve margins but has also reduced the revenues of smaller companies further down the supply chain. This divergence will be covered in an upcoming Insight.
The resurgence of COVID-19 and the daily new peaks in confirmed cases has not yet spread to Japan. However, with much of Europe re-entering 'lockdown', we expect the current quarter will not repeat the upturn seen in the second, and therefore, many companies will not meet their full-year targets many of which were recently revised up.
As a result of central bank liquidity creation, much of the recovery in earning that will occur over the next several years has already been discounted in share prices. Although the policy prescriptions that we noted in Japan in the Suga Era will benefit many areas of the economy, Japan remains overweighted in industries that face significant disruption and disintermediation.

BoJ -  Although the amounts are 30% smaller, this week was the first time since the second week of May that the Bank of Japan has purchased ETFs three days in a row. Despite growing attention being paid to the scale and breadth of public sector ownership of Japanese equities, BoJ Governor Kuroda has PM Suga's support for continued interventions. We expect the cumulative total purchases to reach 6% of Total Market Value before the end of the fiscal year. • MARKET TECHNICALS •14-DAY RSI - The Relative Strength Index is close to a new eight-month low but is yet to reach the 'buying-zone' of less than 25.25-DAY TORAKU - This advance/decline indicator is suggesting that a selling climax is likely to occur this month. Panic lows are at levels below 70 - the COVID-19 low of 45 was the lowest level in over twenty years.HIGH-LOW % - Having only just turned negative, this ratio is a long way from the 10-15% level needed to form a buy signal.MCCLELLAN SUMMATION - Similarly, the McClellan A/D Summation is neutral and well above the -4,000 buying zone.MOVING AVERAGES -  Lastly, the Total Market Value is approaching the support level of the 200-Day moving average. If breached, a 50-Day/200-Day negative crossover is likely, extending this correction to below ¥600 trillion.• SECTOR RESULTS &amp; REVISION SCORES TIMELINE •TIMELINE - The results 'season' is now in full 'swing'. To date, the Sectors with the strongest earnings momentum are Machinery, Retail, Electrical Equipment, and Other Materials. The weakest are Other Commerical Products, Information Technology, Real Estate, and Energy. Only four Sectors have a positive Score, lead by Internet Content &amp; Services. • BEST &amp; WORST •Our best and worst pairings from Friday's announcements are M3 Inc (2413 JP) and Lasertec (6920 JP) for the best and Pola Orbis (4927 JP) and Mitsui (8031 JP) for the worst. 

DAILY STATS
Results are evenly split between positive and neutral, however, TTM revenues are still falling by 5% and operating margins are on average 1.5 points lower. 60% of annual revisions are negative and the average change in score is a decline of 4 points.


407 Quarterly Results

Results Score: 42% Positive / 6% Neutral / 42% Negative
Average Results Score Change: -1.2 points
Average % Change in Revenue: -7.9% Quarter YoY / -5.2% Rolling TTM YoY 
Average Operating Profit Margin Change: -1.5ppt
Percentage Making Quarterly Losses: 20%


197 Annual • 45 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 31% Positive / 9% Neutral / 59% Negative
Interim Forecast/Revision Score Change: 47% Positive / 11% Neutral / 42% Negative
Average Forecast/Revision Score Change: -4.0 points


🇯🇵 JAPAN • Market Update & Results & Revisions 10/​​​​​​​​​​​​​​​​​​​​​30

Japan

Lasertec Corporation develops, designs, manufactures and markets photomask inspection systems to make semiconductor devices, confocal scanning laser microscopes and liquid crystal display (LCD) inspection systems.

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Lasertec Corp (6920 JP)

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