'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

Former Japan Equity PM with over 30 of experience now providing database-driven analysis of the market, sectors, peer groups and stocks for LightStream Research.

Leveraging data and graphic analysis provided by Japan Analytics, and the related Japan Analytics iPad App, we provide insights on companies are often ignored by the sell-side as well as challenging conventional wisdom on the market overall.

'Quantamental' Japan Specialist

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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/000/079/068/original/2019-02-17_10-57-33.png?1550368676" class="editor-image img-responsive" data-smartkarma-image-id="79068"></figure><div class="content-caption">Source: Japan Analytics</div>PEAK CYCLE EARNINGS - In our <a href="https://www.smartkarma.com/insights/japan-winter-results-revisions-flash-cycle-earnings-peak-was-december-26th" target="_blank" data-smartkarma-citation="insights:28022">Winter Results &amp; Revisions Flash</a> Insight of yesterday, we noted that Japanese listed corporate earnings, after nine consecutive 'up' quarters, peaked on December 26th, two days before the market reached a twenty-month low having declined 22.5% in the preceding three months. Forecast earnings peaked on November 7th and have led reported earnings to the downside since August last year.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/079/069/original/2019-02-17_11-06-28.png?1550369207" class="editor-image img-responsive" data-smartkarma-image-id="79069"></figure><div class="content-caption">Source: Japan Analytics</div>ONE-YEAR LAG - Reported and forecast earnings are a lagging indicator and, in this instance, lagged by just under one year. Our preferred leading indicator, the Results &amp; Revision Score which includes earnings momentum factors, peaked on 11th November 2017, 44 trading days ahead of the peak in the Market Composite. As of Friday's close and with 99% of this quarters' announcements made, the Results &amp; Revisions Score is at a new 21-month. The score has now fallen by 70% and has halved since October 26th last year. We will cover the outlook in more detail in our upcoming quarterly Results and Revision review. However, the last two cycles (2009 and 2016) saw 'trough' scores of -9.6 and -2.1, respectively. There is ample room on the downside as export volumes continue to decline and the increase in the consumption tax in October tips Japan into a recession by year-end.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/079/070/original/2019-02-17_11-59-44.png?1550372400" class="editor-image img-responsive" data-smartkarma-image-id="79070"></figure><div class="content-caption">Source: Japan Analytics</div>SIDEWAYS - The market has moved sideways through the reporting window rising 0.7% in Yen terms and falling 0.7% in US$ terms. The weakness in the currency has helped offset the slide in profits.MARKET/SECTOR STRATEGY- We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the Information Technology, Internet, Media, and Telecommunications sectors. We would avoid or short the financial sectors Banks, Non-Bank Finance and Multi-Industry (Japan Post). We would underweight the Auto and Other Consumer Products sectors as consumer spending contracts further in the US, Europe, China and in Japan later in the year. In the DETAIL section below, we will review Sector performance over the last two weeks, and, in addition to our regular roundup of company results, revisions and stock performance over the previous two weeks, including brief comments on <a href="https://www.smartkarma.com/entities/5439" target="_blank" data-smartkarma-citation="entities:5439:1">Subaru (7270 JP)</a>, <a href="https://www.smartkarma.com/entities/1301" target="_blank" data-smartkarma-citation="entities:1301:1">Infomart (2492 JP)</a>, <a href="https://www.smartkarma.com/entities/16576" target="_blank" data-smartkarma-citation="entities:16576:1">Lion (4912 JP)</a>, <a href="https://www.smartkarma.com/entities/4102" target="_blank" data-smartkarma-citation="entities:4102:1">Nissan Chemical (4021 JP)</a>, <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/6267" target="_blank" data-smartkarma-citation="entities:6267:1">Suruga Bank (8358 JP)</a>, and <a href="https://www.smartkarma.com/entities/27149" target="_blank" data-smartkarma-citation="entities:27149:1">Mercari (4385 JP)</a>.

Source: Japan AnalyticsPEAK CYCLE EARNINGS - In our Winter Results &amp; Revisions Flash Insight of yesterday, we noted that Japanese listed corporate earnings, after nine consecutive 'up' quarters, peaked on December 26th, two days before the market reached a twenty-month low having declined 22.5% in the preceding three months. Forecast earnings peaked on November 7th and have led reported earnings to the downside since August last year.Source: Japan AnalyticsONE-YEAR LAG - Reported and forecast earnings are a lagging indicator and, in this instance, lagged by just under one year. Our preferred leading indicator, the Results &amp; Revision Score which includes earnings momentum factors, peaked on 11th November 2017, 44 trading days ahead of the peak in the Market Composite. As of Friday's close and with 99% of this quarters' announcements made, the Results &amp; Revisions Score is at a new 21-month. The score has now fallen by 70% and has halved since October 26th last year. We will cover the outlook in more detail in our upcoming quarterly Results and Revision review. However, the last two cycles (2009 and 2016) saw 'trough' scores of -9.6 and -2.1, respectively. There is ample room on the downside as export volumes continue to decline and the increase in the consumption tax in October tips Japan into a recession by year-end.Source: Japan AnalyticsSIDEWAYS - The market has moved sideways through the reporting window rising 0.7% in Yen terms and falling 0.7% in US$ terms. The weakness in the currency has helped offset the slide in profits.MARKET/SECTOR STRATEGY- We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the Information Technology, Internet, Media, and Telecommunications sectors. We would avoid or short the financial sectors Banks, Non-Bank Finance and Multi-Industry (Japan Post). We would underweight the Auto and Other Consumer Products sectors as consumer spending contracts further in the US, Europe, China and in Japan later in the year. In the DETAIL section below, we will review Sector performance over the last two weeks, and, in addition to our regular roundup of company results, revisions and stock performance over the previous two weeks, including brief comments on Subaru (7270 JP), Infomart (2492 JP), Lion (4912 JP), Nissan Chemical (4021 JP), Keyence (6861 JP), Suruga Bank (8358 JP), and Mercari (4385 JP). 

Japan: Fortnightly Update: Past the Peak