Japan/Asia Long-Short, LightStream Research

Mio Kato

Over 15 years analysing Japanese and Asian stocks from a long/short perspective

I focus on cyclically driven sectors such as Gaming, Factory Automation and Autos

An eclectic background as a long-short analyst, upper management at a financial data startup through its listing, and as the founder of a team analysing big/alternative data, all of which supports independent and differentiated views... we hope

An appreciation for Mathematics drives the development of a "Micro-Quantamental" process which can provide a data-driven, historically-informed and semi-automated foundation upon which to layer more qualitative and judgemental analysis, thus improving investment decision-making speed and accuracy

Japan/Asia Long-Short

Reflecting on 2017 and Core Ideas to Start 2018

Zinc Prospects and Share Price Fall Make Dowa a Buy Again

Toyota Completes Move to Become Nexus of Japan Auto Industry with Suzuki Tie-Up

Japanese and Asian equity long/short strategies

Uzabase

Specialising in Japanese and Asian equity long/short strategies with a focus on rigorous, but targeted quantitative analysis to temper evaluations of company strategy, potential and vision. At Uzabase, our team of analysts provides coverage of industry dynamics with a local Asian flavour on Speeda, our financial information platform. Going forward we are aiming to channel our focus toward thematic research on emerging industries and company research.

Thematic (Sector/Industry)

<p>With the year half finished we look back at the performance of our Japanese stock ideas over the last 9 months since we first began writing on Smartkarma and also focus on the short-term performance of our conviction calls highlighted just over two months ago in <a href="https://www.smartkarma.com/insights/golden-ideas-for-golden-week" target="_blank" data-smartkarma-citation="insights:10418">Golden Ideas for Golden Week</a>.</p><h2>Going 5-1 on Golden Week</h2><p>Of the six ideas we noted in the Golden Week insight, five would be in the money as of today with an average return of 7.2%, while one idea would be out of the money with a return of -18.4%. A simple average of the returns would be +2.9% in about two and half months. Our incorrect call was being positive on <a href="https://www.smartkarma.com/entities/8280" target="_blank" data-smartkarma-citation="entities:8280:1">Japan Display Inc (6740 JP)</a> due to its rock-bottom valuation and potential for restructuring. Developments at <a href="https://www.smartkarma.com/entities/666" target="_blank" data-smartkarma-citation="entities:666:1">Apple Inc (AAPL US)</a> with the switch to OLED have hurt the company's earning potential due to their heavy dependence on the company. While we have been badly wrong, we have always flagged this as a high-risk idea and with consensus estimates having fallen drastically, we continue to feel that valuations give us a significant margin of error to recoup losses if even minor good news starts to flow. The five successful ideas were long <a href="https://www.smartkarma.com/entities/14050" target="_blank" data-smartkarma-citation="entities:14050:1">Dowa Holdings Co Ltd (5714 JP)</a> (+3.7%), Long <a href="https://www.smartkarma.com/entities/2458" target="_blank" data-smartkarma-citation="entities:2458:1">Yaskawa Electric Corp (6506 JP)</a> vs. <a href="https://www.smartkarma.com/entities/752" target="_blank" data-smartkarma-citation="entities:752:1">Fanuc Corp (6954 JP)</a> (+14.8% vs. -1.0% for a return of +16.1%), long <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor Corp (7203 JP)</a> vs. <a href="https://www.smartkarma.com/entities/5439" target="_blank" data-smartkarma-citation="entities:5439:1">Subaru Corp (7270 JP)</a> (+0.6% vs. -5.1% for a return of +6.1%), long <a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">Start Today Co Ltd (3092 JP)</a> (+9.1%) and long <a href="https://www.smartkarma.com/entities/3794" target="_blank" data-smartkarma-citation="entities:3794:1">Tsubakimoto Chain Co (6371 JP)</a> (+0.9%). We feel that all of these ideas remain attractive at this point.</p><h2>72% Hit Rate Since we Joined Smartkarma</h2><p>While not all of our recommendations have been extremely strong and some have leaned towards neutral, assessing the success of ideas simply by comparing the bias against share price performance gives us a hit rate of exactly 72% (18 correct calls out of 25) or 72.2% (13 out of 18) if restricting ideas to just those which have been in place for at least three months. Our hit rate was a pleasing 88.2% on the long side (15 out of 17) but only 50% on the short side (4 out of 8). This isn't entirely surprising with Topix up 23.6% since our first report last Sep and up 6.8% since the beginning of the year (before which we had only commented on three stocks).</p>

With the year half finished we look back at the performance of our Japanese stock ideas over the last 9 months since we first began writing on Smartkarma and also focus on the short-term performance of our conviction calls highlighted just over two months ago in Golden Ideas for Golden Week.Going 5-1 on Golden WeekOf the six ideas we noted in the Golden Week insight, five would be in the money as of today with an average return of 7.2%, while one idea would be out of the money with a return of -18.4%. A simple average of the returns would be +2.9% in about two and half months. Our incorrect call was being positive on Japan Display Inc (6740 JP) due to its rock-bottom valuation and potential for restructuring. Developments at Apple Inc (AAPL US) with the switch to OLED have hurt the company's earning potential due to their heavy dependence on the company. While we have been badly wrong, we have always flagged this as a high-risk idea and with consensus estimates having fallen drastically, we continue to feel that valuations give us a significant margin of error to recoup losses if even minor good news starts to flow. The five successful ideas were long Dowa Holdings Co Ltd (5714 JP) (+3.7%), Long Yaskawa Electric Corp (6506 JP) vs. Fanuc Corp (6954 JP) (+14.8% vs. -1.0% for a return of +16.1%), long Toyota Motor Corp (7203 JP) vs. Subaru Corp (7270 JP) (+0.6% vs. -5.1% for a return of +6.1%), long Start Today Co Ltd (3092 JP) (+9.1%) and long Tsubakimoto Chain Co (6371 JP) (+0.9%). We feel that all of these ideas remain attractive at this point.72% Hit Rate Since we Joined SmartkarmaWhile not all of our recommendations have been extremely strong and some have leaned towards neutral, assessing the success of ideas simply by comparing the bias against share price performance gives us a hit rate of exactly 72% (18 correct calls out of 25) or 72.2% (13 out of 18) if restricting ideas to just those which have been in place for at least three months. Our hit rate was a pleasing 88.2% on the long side (15 out of 17) but only 50% on the short side (4 out of 8). This isn't entirely surprising with Topix up 23.6% since our first report last Sep and up 6.8% since the beginning of the year (before which we had only commented on three stocks).

A Look Back At Our 1H Calls and Their Performance