Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>About ten weeks ago, <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar, CFA</a> wrote about the likelihood that <a href="https://www.smartkarma.com/entities/sre-holdings-corp" target="_blank" data-smartkarma-citation="entities:29672:1" rel="noopener">SRE Holdings Corp (2980 JP)</a> would move to the TSE's First Section in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-event-trade-2980-jp-sre-holdings" target="_blank" data-smartkarma-citation="insights:43530" rel="noopener">TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings</a> which pretty much explained the case in its title, and suggested that it was a likely candidate to move when it reached its 1-year anniversary of listing. </p><p>Janaghan's analysis on SRE was based on his analysis of TOPIX Inclusion bets in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-recent-tachiaigai-bunbai-round-up" target="_blank" data-smartkarma-citation="insights:40509" rel="noopener">TOPIX Inclusion Pre-Events: Recent "Tachiaigai Bunbai" Round-Up</a> and <a href="https://www.smartkarma.com/insights/historical-topix-inclusions-what-flavor-performs-best" target="_blank" data-smartkarma-citation="insights:39523" rel="noopener">Historical TOPIX Inclusions:  What Flavor Performs Best?</a>). His more recent work developed since the TSE1 Listing Rules changed last month is available in <a href="https://www.smartkarma.com/insights/topix-inclusions-new-regulations-who-is-ready-2-0" target="_blank" data-smartkarma-citation="insights:45783" rel="noopener">TOPIX Inclusions:  New Regulations! Who Is READY? 2.0</a>.</p><p>Indeed, SRE was his top pick:</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/178/339/original/Screenshot%202020-12-14%20at%207.14.20%20PM.png?1607944479" class="editor-image img-responsive" data-smartkarma-image-id="178339"></figure></section><p>Today after market close, SRE announced (<a href="https://ssl4.eir-parts.net/doc/2980/tdnet/1912909/00.pdf" target="_blank" rel="noopener">J-only</a>) they had received approval to move from TSE MOTHERS to the First Section of the Tokyo Stock Exchange as of 23rd December 2020 - two trading days after the end of the above-mentioned 1-year post-IPO waiting period. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. </p><p>They also announced a small offering which can be ignored.</p><p>In this insight, we take a look at the Index Inclusion Parameters and the offering to evaluate the upside potential of the TOPIX Inclusion Event. It is, for those of you who follow the Quiddity TOPIX Inclusion Framework, a GREEN, but it is really just across the border from BLUE which is still OK. </p>

About ten weeks ago, Janaghan Jeyakumar, CFA wrote about the likelihood that SRE Holdings Corp (2980 JP) would move to the TSE's First Section in TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings which pretty much explained the case in its title, and suggested that it was a likely candidate to move when it reached its 1-year anniversary of listing. Janaghan's analysis on SRE was based on his analysis of TOPIX Inclusion bets in TOPIX Inclusion Pre-Events: Recent "Tachiaigai Bunbai" Round-Up and Historical TOPIX Inclusions:  What Flavor Performs Best?). His more recent work developed since the TSE1 Listing Rules changed last month is available in TOPIX Inclusions:  New Regulations! Who Is READY? 2.0.Indeed, SRE was his top pick:Today after market close, SRE announced (J-only) they had received approval to move from TSE MOTHERS to the First Section of the Tokyo Stock Exchange as of 23rd December 2020 - two trading days after the end of the above-mentioned 1-year post-IPO waiting period. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. They also announced a small offering which can be ignored.In this insight, we take a look at the Index Inclusion Parameters and the offering to evaluate the upside potential of the TOPIX Inclusion Event. It is, for those of you who follow the Quiddity TOPIX Inclusion Framework, a GREEN, but it is really just across the border from BLUE which is still OK. 

SRE (2980) TOPIX Inclusion Announced. It's GREEN!

'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)

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

<p><a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> has seen an upward shift in ownership among active Global fund managers.  The percentage of funds invested in <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a>  is at record levels, with weights and overweights continuing to rise. </p><p>Sony is also moving from being an Aggressive Growth play to a stock more appealing to a wider group of Growth, Value and GARP investors.  Our data also shows that this switch has further to run, with many investors with previous knowledge and exposure to <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> remaining on the sidelines, or at lower levels of exposure, for now. </p><p>For this reason, we would expect ownership among Global investors to be well supported, which, given the relationship between fund ownership and price, should be supportive of returns going forwards.</p>

Sony Corp (6758 JP) has seen an upward shift in ownership among active Global fund managers.  The percentage of funds invested in Sony Corp (6758 JP)  is at record levels, with weights and overweights continuing to rise. Sony is also moving from being an Aggressive Growth play to a stock more appealing to a wider group of Growth, Value and GARP investors.  Our data also shows that this switch has further to run, with many investors with previous knowledge and exposure to Sony Corp (6758 JP) remaining on the sidelines, or at lower levels of exposure, for now. For this reason, we would expect ownership among Global investors to be well supported, which, given the relationship between fund ownership and price, should be supportive of returns going forwards.

Sony Corp:  Momentum Strong as Global Funds Continue to Add.

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

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

<p>We first wrote on Sony in mid-2017 noting that <a href="https://www.smartkarma.com/insights/sony-has-got-its-mojo-back-super-slomo-acoustic-surfaces-and-the-world-s-fastest-internet" target="_blank" rel="noopener">Sony Has Got Its Mojo Back: Super Slomo, Acoustic Surfaces, and the World’s Fastest Internet</a> as we felt that Kazuo Hirai’s efforts to restore the company’s innovative culture were starting to bear fruit in a lot of niche areas. In the more than three years since, Sony has built on this momentum and is firing on all cylinders moving into the launch of the PS5 which we believe will be a key driver of the company’s long-term value. While this is hardly a non-consensus opinion, we feel the market may not quite appreciate the degree of potential market share gains hinted at by subtle developments and choices on design. We discuss these and the valuation case below.</p>

We first wrote on Sony in mid-2017 noting that Sony Has Got Its Mojo Back: Super Slomo, Acoustic Surfaces, and the World’s Fastest Internet as we felt that Kazuo Hirai’s efforts to restore the company’s innovative culture were starting to bear fruit in a lot of niche areas. In the more than three years since, Sony has built on this momentum and is firing on all cylinders moving into the launch of the PS5 which we believe will be a key driver of the company’s long-term value. While this is hardly a non-consensus opinion, we feel the market may not quite appreciate the degree of potential market share gains hinted at by subtle developments and choices on design. We discuss these and the valuation case below.

2021 High Conviction – Sony’s Year of the PS5

Japan

Sony Corporation manufactures audio, home video game consoles, communications, key device and information technology products for the consumer and professional markets.  The Company's other businesses include music, pictures, computer entertainment, and online businesses.

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Sony Corp (6758 JP)

SRE (2980) TOPIX Inclusion Announced. It's GREEN!

SRE (2980) is going into TOPIX. Credit Janaghan Jeyakumar for the call. This is a GREEN inclusion - about 10 days of ADV and the company is a...

Travis Lundy

2021 High Conviction 🇯🇵 Sell M3 (2413 JP)

2021 HIGH CONVICTION COLLECTION - For Smartkarma's '2021 High Conviction Collection' we have chosen one of our seven RPS/RRS outliers to be our...

Campbell Gunn

Sony Corp: Momentum Strong as Global Funds Continue to Add.

Sony Corp (6758 JP) has seen an upward shift in ownership among active Global fund managers, but is far from over owned...

Steven Holden

🇯🇵 JAPAN • Four Quadrants - Contrarian Sells

CONTRARIAN SELLS - In the DETAIL below, we shall review the current 'crop' of Contrarian Sells for potential opportunities.

Campbell Gunn

2021 High Conviction – Sony’s Year of the PS5

Sony is a key name investors should be focusing on in 2021 as we believe the company has outlined an excellent path to ensuring PS5 dominance and...

Mio Kato

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