'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

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/068/507/original/2018-11-02_10-20-29.png?1541121653" class="editor-image img-responsive" data-smartkarma-image-id="68507"></figure>Source: Japan Analytics
NB: companies are colour-coded by sector
</div>28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.METHODOLOGY - Our comments follow in the detail below, but first a few notes:-<ul>
<li>In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only <a href="https://www.smartkarma.com/entities/742" target="_blank" data-smartkarma-citation="entities:742:1">Nomura (8604 JP)</a>, <a href="https://www.smartkarma.com/entities/6483" target="_blank" data-smartkarma-citation="entities:6483:1">Aozora (8304 JP)</a> and <a href="https://www.smartkarma.com/entities/16897" target="_blank" data-smartkarma-citation="entities:16897:1">Shinsei (8303 JP)</a> have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are <a href="https://www.smartkarma.com/entities/218" target="_blank" data-smartkarma-citation="entities:218:1">Mitsubishi UFJ (8306 JP)</a>, <a href="https://www.smartkarma.com/entities/217" target="_blank" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial (8316 JP)</a>, <a href="https://www.smartkarma.com/entities/838" target="_blank" data-smartkarma-citation="entities:838:1">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/359" target="_blank" data-smartkarma-citation="entities:359:1">Japan Post Holdings (6178 JP)</a> and <a href="https://www.smartkarma.com/entities/219" target="_blank" data-smartkarma-citation="entities:219:1">Mizuho Financial (8411 JP)</a> from the present day.</li>
<li>Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. </li>
<li>Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as <a href="https://www.smartkarma.com/entities/458" target="_blank" data-smartkarma-citation="entities:458:1">Seibu Holdings (9024 JP)</a> and <a href="https://www.smartkarma.com/entities/1184" target="_blank" data-smartkarma-citation="entities:1184:1">Japan Airlines (9201 JP)</a>, they are no longer highly-ranked.</li>
<li>Seven current Top 20 companies - (<a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo (9437 JP)</a>, <a href="https://www.smartkarma.com/entities/639" target="_blank" data-smartkarma-citation="entities:639:1">KDDI (9433 JP)</a>, <a href="https://www.smartkarma.com/entities/13498" target="_blank" data-smartkarma-citation="entities:13498:1">Japan Tobacco (2914 JP)</a>, <a href="https://www.smartkarma.com/entities/13520" target="_blank" data-smartkarma-citation="entities:13520:1">Central Japan Railway (9022 JP)</a>, <a href="https://www.smartkarma.com/entities/751" target="_blank" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/15070" target="_blank" data-smartkarma-citation="entities:15070:1">Recruit (6098 JP)</a>)  - have listed during the last 28 years. </li>
</ul>THE 2050 RANKING?- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - <a href="https://www.smartkarma.com/entities/3077" target="_blank" data-smartkarma-citation="entities:3077:1">Keyence (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a> and <a href="https://www.smartkarma.com/entities/563" target="_blank" data-smartkarma-citation="entities:563:1">Sony (6758 JP)</a>.


Source: Japan Analytics
NB: companies are colour-coded by sector
28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.METHODOLOGY - Our comments follow in the detail below, but first a few notes:-
In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only Nomura (8604 JP), Aozora (8304 JP) and Shinsei (8303 JP) have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are Mitsubishi UFJ (8306 JP), Sumitomo Mitsui Financial (8316 JP), Japan Post Bank (7182 JP), Japan Post Holdings (6178 JP) and Mizuho Financial (8411 JP) from the present day.
Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. 
Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as Seibu Holdings (9024 JP) and Japan Airlines (9201 JP), they are no longer highly-ranked.
Seven current Top 20 companies - (Softbank (9984 JP), NTT Docomo (9437 JP), KDDI (9433 JP), Japan Tobacco (2914 JP), Central Japan Railway (9022 JP), Fast Retailing (9983 JP) and Recruit (6098 JP))  - have listed during the last 28 years. 
THE 2050 RANKING?- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - Keyence (6861 JP), Toyota Motor (7203 JP) and Sony (6758 JP). 

Japan: The Evolution Of (Non-Financial) Market Leadership

Thematic (Sector/Industry)

IN ONE SENTENCE - If you wish to read no further, this insight can be summarised as - 1st Half &gt; 2nd Half + 1st Quarter &gt; 2nd Quarter &gt; 4th Quarter &gt;&gt; 3rd Quarter and so perhaps the old adage should be modified for Japan to read 'Sell in July and Say Goodbye...Please Come Back on Culture Day (November 3rd)'
SEASONALITY SCORE - We have also calculated a Seasonality Score for each stock, sector, cap range and the market as a measure of the seasonality of returns. The highest current score is 22.0 for the aptly-named <a href="https://www.smartkarma.com/entities/5311" target="_blank" data-smartkarma-citation="entities:5311:1">Extreme (6033 JP)</a>, with the Kyushu regional bank <a href="https://www.smartkarma.com/entities/6035" target="_blank" data-smartkarma-citation="entities:6035:1">Miyazaki Taiyo Bank (8560 JP)</a> (traded 'appointment-only' on the Fukuoka Stock Exchange) having the lowest score of 0.33. Miyazaki Taiyo is also one of the three stocks which have positive returns on average for only two months of the year - the others being fellow Fukuoka-listed Kyushu bank <a href="https://www.smartkarma.com/entities/5367" target="_blank" data-smartkarma-citation="entities:5367:1">Minami Nippon (8554 JP)</a> and biotechnology pioneer <a href="https://www.smartkarma.com/entities/3429" target="_blank" data-smartkarma-citation="entities:3429:1">Reprocell (4978 JP)</a>. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/062/938/original/2018-09-05_19-59-32.png?1536145211" class="editor-image img-responsive" data-smartkarma-image-id="62938"></figure>
<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/062/939/original/2018-09-05_20-00-36.png?1536145254" class="editor-image img-responsive" data-smartkarma-image-id="62939"></figure>
Source: Japan Analytics
</div>
A JAPANESE SEASONALITY THEORY - In addition to weakness the August, there is a tendency for the 'middle' month in each quarter to be weaker than the first and last, with the only exception being November. These middle months coincide with the peak in quarterly earnings announcements for companies with year-ends in March, June, October and December which account for 63% by number but 92% by market capitalisation of currently listed companies.  With significant and increasing volatility around such periods, there are greater opportunities for trend reversals and, as a result, performance in these months tends to be more muted. As to why August and February are the worst-performing of these middle-months, we would turn the question around. May's results include the, normally upbeat, new forecasts for the current year, while November is the second most frequent month for revision announcements for the March-June-October-December cohort. August and February are the months that this group of companies have to 'face' reality without the ability to temper things with hope.
DIVIDEND TIMING - The timing of dividend payments is also a factor in seasonality. With the substantial majority of ex-dividend dates and subsequent receipt of the dividend payments being in May/June and November/December each year, this factor acts as an additional depressant and then booster (to the extent that dividends are re-invested) in each of these month pairs.
SECTORS AND COMPANIES - The insight also provides a detailed analysis of seasonality by sector and company, as well as providing a 'portfolio' of long and short sectors recommendations for the month and lists of stocks ranked by Seasonality Score and the best and worst performing 'September Stocks'.

IN ONE SENTENCE - If you wish to read no further, this insight can be summarised as - 1st Half &gt; 2nd Half + 1st Quarter &gt; 2nd Quarter &gt; 4th Quarter &gt;&gt; 3rd Quarter and so perhaps the old adage should be modified for Japan to read 'Sell in July and Say Goodbye...Please Come Back on Culture Day (November 3rd)'
SEASONALITY SCORE - We have also calculated a Seasonality Score for each stock, sector, cap range and the market as a measure of the seasonality of returns. The highest current score is 22.0 for the aptly-named Extreme (6033 JP), with the Kyushu regional bank Miyazaki Taiyo Bank (8560 JP) (traded 'appointment-only' on the Fukuoka Stock Exchange) having the lowest score of 0.33. Miyazaki Taiyo is also one of the three stocks which have positive returns on average for only two months of the year - the others being fellow Fukuoka-listed Kyushu bank Minami Nippon (8554 JP) and biotechnology pioneer Reprocell (4978 JP). 



Source: Japan Analytics

A JAPANESE SEASONALITY THEORY - In addition to weakness the August, there is a tendency for the 'middle' month in each quarter to be weaker than the first and last, with the only exception being November. These middle months coincide with the peak in quarterly earnings announcements for companies with year-ends in March, June, October and December which account for 63% by number but 92% by market capitalisation of currently listed companies.  With significant and increasing volatility around such periods, there are greater opportunities for trend reversals and, as a result, performance in these months tends to be more muted. As to why August and February are the worst-performing of these middle-months, we would turn the question around. May's results include the, normally upbeat, new forecasts for the current year, while November is the second most frequent month for revision announcements for the March-June-October-December cohort. August and February are the months that this group of companies have to 'face' reality without the ability to temper things with hope.
DIVIDEND TIMING - The timing of dividend payments is also a factor in seasonality. With the substantial majority of ex-dividend dates and subsequent receipt of the dividend payments being in May/June and November/December each year, this factor acts as an additional depressant and then booster (to the extent that dividends are re-invested) in each of these month pairs.
SECTORS AND COMPANIES - The insight also provides a detailed analysis of seasonality by sector and company, as well as providing a 'portfolio' of long and short sectors recommendations for the month and lists of stocks ranked by Seasonality Score and the best and worst performing 'September Stocks'.  

Japan: Seasonality - "Sell in July and Say Goodbye...Please Come Back on Culture Day"

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

Having reached a high of ¥1,852 on July 31 2018, <a href="https://www.smartkarma.com/entities/20702" target="_blank" data-smartkarma-citation="entities:20702:1">Bank Of The Ryukyus (8399 JP)</a>’ share price nosedived 15% on Monday of last week to a low of ¥1,272 before recovering to ¥1,320 at the close of business on Friday August 31.  Turnover on Friday was 1.34 million shares: over 11x normal daily trading volume.  Surely not caused by rumours of yet another “inappropriate” regional bank lending scandal?  Fortunately, no: just a very badly-timed announcement of an attempt to raise an additional ¥6 billion (approx. US$55 million) in new capital to support lending operations in the scuba-diving and snorkeling paradise that is Okinawa Prefecture. While the stock may look inexpensive, trading on a PER of 8.4x (using the bank’s own FY3/2019 guidance) and on an historic PBR of just 0.43x, there are good reasons for this low valuation.  The current surge in volume is likely to be only temporary: a value trap for the unwary.  Caveat emptor (may the buyer beware!).

Having reached a high of ¥1,852 on July 31 2018, Bank Of The Ryukyus (8399 JP)’ share price nosedived 15% on Monday of last week to a low of ¥1,272 before recovering to ¥1,320 at the close of business on Friday August 31.  Turnover on Friday was 1.34 million shares: over 11x normal daily trading volume.  Surely not caused by rumours of yet another “inappropriate” regional bank lending scandal?  Fortunately, no: just a very badly-timed announcement of an attempt to raise an additional ¥6 billion (approx. US$55 million) in new capital to support lending operations in the scuba-diving and snorkeling paradise that is Okinawa Prefecture. While the stock may look inexpensive, trading on a PER of 8.4x (using the bank’s own FY3/2019 guidance) and on an historic PBR of just 0.43x, there are good reasons for this low valuation.  The current surge in volume is likely to be only temporary: a value trap for the unwary.  Caveat emptor (may the buyer beware!).

Bank of the Ryukyus (8399 JP): Taking a Dive

TREASURY SHARES IN JAPAN - As a prelude to an upcoming insight on share buybacks in Japan, this note is a fork of <a href="https://www.smartkarma.com/profiles/342" target="_blank" data-smartkarma-citation="accounts:342">Douglas Kim</a> 's quick note on Korean Companies with Highest Levels of Treasury Shares. We highlight the Japanese companies with the highest percentage of Treasury Shares to shares in issue as well as those larger capitalisation stocks that have forgone the pleasure of buybacks.2.7% OF SHARES HELD IN TREASURY - As is the case in Korea, most Japanese companies do not cancel shares after…

TREASURY SHARES IN JAPAN - As a prelude to an upcoming insight on share buybacks in Japan, this note is a fork of Douglas Kim 's quick note on Korean Companies with Highest Levels of Treasury Shares. We highlight the Japanese companies with the highest percentage of Treasury Shares to shares in issue as well as those larger capitalisation stocks that have forgone the pleasure of buybacks.2.7% OF SHARES HELD IN TREASURY - As is the case in Korea, most Japanese companies do not cancel shares after…

Japan: Treasury Share 'Kings' and 'Paupers'

CYCLICAL SECTORS RALLY WITH THE MARKET - Japanese equities have rallied 3.6% over the last two weeks, and the market composite is now flat since the end of April. Mean reversion was widespread and the range from worst to best three-month change narrowed from 22.5% to 18.1%. Banks, Energy, Chemicals, and Metals led, while REITs, Media,Telcom and Retail lagged. Domestic growth sectors (Internet, Commercial Services, Information Technology and Healthcare) are still well ahead over three months…

CYCLICAL SECTORS RALLY WITH THE MARKET - Japanese equities have rallied 3.6% over the last two weeks, and the market composite is now flat since the end of April. Mean reversion was widespread and the range from worst to best three-month change narrowed from 22.5% to 18.1%. Banks, Energy, Chemicals, and Metals led, while REITs, Media,Telcom and Retail lagged. Domestic growth sectors (Internet, Commercial Services, Information Technology and Healthcare) are still well ahead over three months…

Japan Fortnightly Update: Banks to Neutral/Utilities to Negative - Results Momentum Still Slowing

Japan

Nomura Holdings, Inc. is a holding company which manages financial operations for its subsidiaries.  As a group, the Company provides a variety of financial services such as dealing, brokerage, underwriting, and asset management. Nomura Securities Co., a registered member of the New York and London Stock Exchanges, has branches around the world.

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Nomura Holdings (8604 JP)

Japan: The Evolution Of (Non-Financial) Market Leadership

28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the...

Campbell Gunn

Japan: Seasonality - "Sell in July and Say Goodbye...Please Come Back on Culture Day"

IN ONE SENTENCE - If you wish to read no further, this insight can be summarised as - 1st Half > 2nd Half + 1st Quarter > 2nd Quarter >...

Campbell Gunn

Bank of the Ryukyus (8399 JP): Taking a Dive

Having reached a high of ¥1,852 on July 31 2018, Bank Of The Ryukyus (8399 JP)’ share price nosedived 15% on Monday of last week to a low of ¥1,272...

J. Brian Waterhouse

Japan Fortnightly Update: Banks to Neutral/Utilities to Negative - Results Momentum Still Slowing

CYCLICAL SECTORS RALLY WITH THE MARKET - Japanese equities have rallied 3.6% over the last two weeks, and the market composite is now flat since...

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japan: The Evolution Of (Non-Financial) Market Leadership

28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the...

Campbell Gunn

Japan: Seasonality - "Sell in July and Say Goodbye...Please Come Back on Culture Day"

IN ONE SENTENCE - If you wish to read no further, this insight can be summarised as - 1st Half > 2nd Half + 1st Quarter > 2nd Quarter >...

Campbell Gunn

Bank of the Ryukyus (8399 JP): Taking a Dive

Having reached a high of ¥1,852 on July 31 2018, Bank Of The Ryukyus (8399 JP)’ share price nosedived 15% on Monday of last week to a low of ¥1,272...

J. Brian Waterhouse

Japan: Treasury Share 'Kings' and 'Paupers'

TREASURY SHARES IN JAPAN - As a prelude to an upcoming insight on share buybacks in Japan, this note is a fork of Douglas Kim 's quick note on...

Campbell Gunn

Japan Fortnightly Update: Banks to Neutral/Utilities to Negative - Results Momentum Still Slowing

CYCLICAL SECTORS RALLY WITH THE MARKET - Japanese equities have rallied 3.6% over the last two weeks, and the market composite is now flat since...

Campbell Gunn