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

A Look Back At Our 1H Calls and Their Performance

Zinc Prospects and Share Price Fall Make Dowa a Buy Again

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.

Thematic (Sector/Industry)

Japan Consumer discretionary / Thematic (Sector/Industry)

2017 was an eventful year for us. Our experience writing for Smartkarma inspired us to join forces with Finatext, an alternative data/fintech startup based in Tokyo, to establish an independent research company we named LightStream. Utilising a wealth of creative research methodologies alongside Smartkarma's innovative distribution platform, we hope to make our own positive contribution to the movement to transform investment research by informing readers' research processes and engaging with the lively insight provider discussions that are a huge part of what gives the Smartkarma community its edge and intellectual vitality.And so as we begin 2018 we take a look back at  our results in our first year writing for Smartkarma. Overall, our bullish ideas returned an annualised 20.7% relative to Topix (time weighted average). Meanwhile, our bearish ideas returned an annualised 3.7% relative to Topix (3.7% lower than Topix for positive alpha generation). Including both bullish ideas (29) and bearish ideas (9), the average annualised relative return was 16.0%.Our results on IPOs were rather more mixed. We were rightly positive on both <a href="https://www.smartkarma.com/entities/25948" target="_blank" data-smartkarma-citation="entities:25948:1">Silver Life Co Ltd (9262 JP)</a> and  <a href="https://www.smartkarma.com/entities/26070" target="_blank" data-smartkarma-citation="entities:26070:1">SG Holdings Co Ltd (9143 JP)</a> while also correctly recommending that readers avoid <a href="https://www.smartkarma.com/entities/26072" target="_blank" data-smartkarma-citation="entities:26072:1">Aruhi Corp (7198 JP)</a> which has treaded water. However, we were inclined to avoid <a href="https://www.smartkarma.com/entities/26073" target="_blank" data-smartkarma-citation="entities:26073:1">Katitas Co Ltd (8919 JP)</a> which finished its first trading day 13% above its IPO price and proceeded to race up 58% over the next 3 weeks. In a similar vein, we were too hasty in pronouncing SG Holdings fully valued, as it finished its first trading day 18% above its IPO price and eventually ended December 41% above its IPO price. Overall, Silver Life is up 85% above its IPO price, meaning that the deals we felt should be taken returned an average of 33% while the deals we recommended avoiding returned an average of 29% - a rather mediocre result.With Japan and Asia demonstrating strong momentum into the year end we saw our hit rate rise from about 72% at mid year (<a href="https://www.smartkarma.com/insights/a-look-back-at-our-1h-calls-and-their-performance" target="_blank" data-smartkarma-citation="insights:12180">A Look Back At Our 1H Calls and Their Performance</a>) to about 74% at year end, thanks to 89% of our long ideas working despite only 2 of 8 short ideas falling (although 2 other ideas more or less treaded water). Relative to Topix 4 of 8 short ideas (50%) generated alpha while 19 of 27 (70%) long ideas generated alpha for an average 66% hit rate. Note that we measure returns based on the closing price the day after an insight or relevant comment is published.These results were pleasing, though we do note that they were skewed by virtue of our bullish call on robotics this year which worked extremely well. Nevertheless, we did correctly pick Yaskawa as our top pick among the four names we covered and while our bearish call on Fanuc was wrong, the name was the weakest performer in our coverage group. On the flip side, our biggest errors this year tended to be due to errors of omission and being overly pessimistic. This resulted in us failing to recommend locking in profits on some bearish smaller cap recommendations which were profitable as late as Aug, before rushing up during the market's strong rally into year end. Similarly, we were too pessimistic in the materials sector where more cyclical names performed very well into the year end, confounding our preference for less cyclical names that are in our opinion, higher quality.Recapping our conviction ideas from all the way back 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>, the Yaskawa/Fanuc ratio was up 60% (until Oct 24), the Toyota/Subaru ratio was up 37%, Start Today was up 29%, Dowa was up 9%, Japan Display was down 1% and Tsubakimoto Chain was down -8%  vs. Topix which rose 15% from May 8 to the end of the year. While the hit rate was unimpressive we were pleased to generate such stellar performance from low beta pair trades.We discuss our conviction ideas and sector stances for the new year below.

2017 was an eventful year for us. Our experience writing for Smartkarma inspired us to join forces with Finatext, an alternative data/fintech startup based in Tokyo, to establish an independent research company we named LightStream. Utilising a wealth of creative research methodologies alongside Smartkarma's innovative distribution platform, we hope to make our own positive contribution to the movement to transform investment research by informing readers' research processes and engaging with the lively insight provider discussions that are a huge part of what gives the Smartkarma community its edge and intellectual vitality.And so as we begin 2018 we take a look back at  our results in our first year writing for Smartkarma. Overall, our bullish ideas returned an annualised 20.7% relative to Topix (time weighted average). Meanwhile, our bearish ideas returned an annualised 3.7% relative to Topix (3.7% lower than Topix for positive alpha generation). Including both bullish ideas (29) and bearish ideas (9), the average annualised relative return was 16.0%.Our results on IPOs were rather more mixed. We were rightly positive on both Silver Life Co Ltd (9262 JP) and  SG Holdings Co Ltd (9143 JP) while also correctly recommending that readers avoid Aruhi Corp (7198 JP) which has treaded water. However, we were inclined to avoid Katitas Co Ltd (8919 JP) which finished its first trading day 13% above its IPO price and proceeded to race up 58% over the next 3 weeks. In a similar vein, we were too hasty in pronouncing SG Holdings fully valued, as it finished its first trading day 18% above its IPO price and eventually ended December 41% above its IPO price. Overall, Silver Life is up 85% above its IPO price, meaning that the deals we felt should be taken returned an average of 33% while the deals we recommended avoiding returned an average of 29% - a rather mediocre result.With Japan and Asia demonstrating strong momentum into the year end we saw our hit rate rise from about 72% at mid year (A Look Back At Our 1H Calls and Their Performance) to about 74% at year end, thanks to 89% of our long ideas working despite only 2 of 8 short ideas falling (although 2 other ideas more or less treaded water). Relative to Topix 4 of 8 short ideas (50%) generated alpha while 19 of 27 (70%) long ideas generated alpha for an average 66% hit rate. Note that we measure returns based on the closing price the day after an insight or relevant comment is published.These results were pleasing, though we do note that they were skewed by virtue of our bullish call on robotics this year which worked extremely well. Nevertheless, we did correctly pick Yaskawa as our top pick among the four names we covered and while our bearish call on Fanuc was wrong, the name was the weakest performer in our coverage group. On the flip side, our biggest errors this year tended to be due to errors of omission and being overly pessimistic. This resulted in us failing to recommend locking in profits on some bearish smaller cap recommendations which were profitable as late as Aug, before rushing up during the market's strong rally into year end. Similarly, we were too pessimistic in the materials sector where more cyclical names performed very well into the year end, confounding our preference for less cyclical names that are in our opinion, higher quality.Recapping our conviction ideas from all the way back in Golden Ideas for Golden Week, the Yaskawa/Fanuc ratio was up 60% (until Oct 24), the Toyota/Subaru ratio was up 37%, Start Today was up 29%, Dowa was up 9%, Japan Display was down 1% and Tsubakimoto Chain was down -8%  vs. Topix which rose 15% from May 8 to the end of the year. While the hit rate was unimpressive we were pleased to generate such stellar performance from low beta pair trades.We discuss our conviction ideas and sector stances for the new year below.

Reflecting on 2017 and Core Ideas to Start 2018