5965.JP - Fujimak Corp

[west]

With these guys I like to rip the bandaid off all at once.  And they're small enough (edit/clarification: as a position size in my portoflio, 1%-2%) that if they do lose half their value I can double my position without being to concerned about it.

 

For my larger holdings I do like to slowly get into them.  Especially since premature accumulation seems to be the rule, rather than the exception, in value investing.

[oddballstocks]

If the price drops like crazy I'll look at their results as well.  Otherwise I do nothing, literally nothing.

 

Imho, I would put this company on the back burner and forget about it.  Realistically none of us can really have a complete understanding of the company due to the language barrier, so we're just deluding ourselves if we think otherwise.  And we definitely should not get caught up in quarter to quarter earnings fluctuations.

 

Do you guys buy a full position at the outset, albeit understandably a small percentage (say 0.5 - 2% of portfolio), and intend never to buy more?  Or do you leave room to average down, e.g., buy a very small position initially and then buy more to reach a small position if the price drops appreciably?

 

Admittedly, net-net investing will have to be different from the style of value investing that seeks a few large concentrated positions, and foreign net-net investing may be even more so.  So if you had access only to limited info (such as ft.com statistics and maybe some press releases, but no reliable translations of full annual reports), is the tactic of averaging-down out of the question for you guys?

 

I realize this question is a hypothetical, so feel free to make as many qualifications as you please.  Anyone else also feel free to chime in with your 2 cents.

 

I purchase all at once.  Many of these positions are no smaller than other positions I hold.  I don't agree with the dogma that "correct" value investing is owning 5 positions that you research for a year and scale into for six months.

 

Regarding research, how much do you need to do?  A few notes on this, I've dug around and found annual reports in English for some of these companies.  I've also translated them.  When buying a company at 50% of book value, or 50% of NCAV I didn't feel like reading the reports added any value.  I also have access to financials beyond FT.com, I haven't found they've added any value either, they just confirm what I already know.

 

The point of this is these companies are very cheap, that's starting point #1.  You need to establish beyond any doubt in your mind that these are cheap companies, so discount to assets or whatever.  Then you need to look at risk, what kills these guys is debt.  So you buy something that's slowly growing and has relatively little debt or is debt free.  In Japan that's a formula to survive forever.  Companies over there are survivors, they just last.  They can grind out small returns for an eternity.  I believe there's a 900 year old hotel company still running, just grinding out low returns.  The culture is impressive.

 

I know many investors find comfort in reading or understanding what they're investing in.  But in many ways I don't see this any different from buying an ETF.  If I were to buy some ETF it might hold 10-15 major positions.  I don't research them, I just like the basis of the ETF.  This ETF happens to be little Japanese companies trading at crazy low prices. 

 

Here are the key points I'd say for Japan: a large discount to assets, earnings of some sort, stable number of shares, low or no debt, stable business.  You can use the Japan company handbook to see if a business is stable.  By this I mean they don't change what they do often.  I'd say this is a bigger risk than most would suspect, if you browse the book there are many companies changing what they do every few years.  If you have those aspects noted above in an investment I think you can just buy and wait.  I've been doing this since 2011, I continually recycle the gains back into more positions.  This isn't sexy, I won't win any awards for creativity, and it's something most investors think is stupid.  I don't care, it's been making me money, and I'm just riding the wave.

[cobafdek]

With these guys I like to rip the bandaid off all at once.

 

 

I know many investors find comfort in reading or understanding what they're investing in.  But in many ways I don't see this any different from buying an ETF.  If I were to buy some ETF it might hold 10-15 major positions.  I don't research them, I just like the basis of the ETF.  This ETF happens to be little Japanese companies trading at crazy low prices. 

 

Great answers (and analogies) guys, thanks.

 

I, too, go all in when it comes to the individual net-net.  I figure the country basket I am assembling is my "large position, concentrated stock" of that country, so that if I buy over time, I may be "averaging down" from the perspective of the overall country basket.  Consequently, if a single stock were to drop 50% or more, I wouldn't sell it or buy more, but would hold on for my time frame of 3-5 years.

 

I'm just wondering out loud why Schloss did not do much international investing (if I remember correctly, he also wasn't as successful at it).  I've read that he would frequently buy a very small position in the U.S. even before ordering the annual reports/10Ks.  Then, if the stock price drops or he likes what he reads, he may buy more.  Perhaps (1) this strategy of his did not work well internationally, or (2) foreign stock reporting and accounting has improved since his time, or (3) a little of both.  Perhaps someone has some plausible insight regarding my speculative question.  I haven't read much Cundill yet, but it is well-known he was successful with multiple country stocks. 

[peter1234]

With these guys I like to rip the bandaid off all at once.

 

 

I know many investors find comfort in reading or understanding what they're investing in.  But in many ways I don't see this any different from buying an ETF.  If I were to buy some ETF it might hold 10-15 major positions.  I don't research them, I just like the basis of the ETF.  This ETF happens to be little Japanese companies trading at crazy low prices. 

 

Great answers (and analogies) guys, thanks.

 

I, too, go all in when it comes to the individual net-net.  I figure the country basket I am assembling is my "large position, concentrated stock" of that country, so that if I buy over time, I may be "averaging down" from the perspective of the overall country basket.  Consequently, if a single stock were to drop 50% or more, I wouldn't sell it or buy more, but would hold on for my time frame of 3-5 years.

 

I'm just wondering out loud why Schloss did not do much international investing (if I remember correctly, he also wasn't as successful at it).  I've read that he would frequently buy a very small position in the U.S. even before ordering the annual reports/10Ks.  Then, if the stock price drops or he likes what he reads, he may buy more.  Perhaps (1) this strategy of his did not work well internationally, or (2) foreign stock reporting and accounting has improved since his time, or (3) a little of both.  Perhaps someone has some plausible insight regarding my speculative question.  I haven't read much Cundill yet, but it is well-known he was successful with multiple country stocks.

 

My guess is that it was information, culture and accounting.

 

His main information was ValueLine.

 

He deeply understood his companies' products and industry cycles.

 

I do not think he was as comfortable with international companies.

[Kraven]

With these guys I like to rip the bandaid off all at once.

 

 

I know many investors find comfort in reading or understanding what they're investing in.  But in many ways I don't see this any different from buying an ETF.  If I were to buy some ETF it might hold 10-15 major positions.  I don't research them, I just like the basis of the ETF.  This ETF happens to be little Japanese companies trading at crazy low prices. 

 

Great answers (and analogies) guys, thanks.

 

I, too, go all in when it comes to the individual net-net.  I figure the country basket I am assembling is my "large position, concentrated stock" of that country, so that if I buy over time, I may be "averaging down" from the perspective of the overall country basket.  Consequently, if a single stockk were to drop 50% or more, I wouldn't sell it or buy more, but would hold on for my time frame of 3-5 years.

 

I'm just wondering out loud why Schloss did not do much international investing (if I remember correctly, he also wasn't as successful at it).  I've read that he would frequently buy a very small position in the U.S. even before ordering the annual reports/10Ks.  Then, if the stock price drops or he likes what he reads, he may buy more.  Perhaps (1) this strategy of his did not work well internationally, or (2) foreign stock reporting and accounting has improved since his time, or (3) a little of both.  Perhaps someone has some plausible insight regarding my speculative question.  I haven't read much Cundill yet, but it is well-known he was successful with multiple country stocks.

 

My guess is that it was information, culture and accounting.

 

His main information was ValueLine.

 

He deeply understood his companies' products and industry cycles.

 

I do not think he was as comfortable with international companies.

 

Yes, he didn't trust the numbers and beyond that felt there was more than enough opportunity in the US. Agreed on Valueline being at least his initial source of info. I wouldn't say though he had a deep understanding of company products and cycles!  He knew what he needed to know and no more than that.

[randomep]

With these guys I like to rip the bandaid off all at once.

 

 

I know many investors find comfort in reading or understanding what they're investing in.  But in many ways I don't see this any different from buying an ETF.  If I were to buy some ETF it might hold 10-15 major positions.  I don't research them, I just like the basis of the ETF.  This ETF happens to be little Japanese companies trading at crazy low prices. 

 

Great answers (and analogies) guys, thanks.

 

I, too, go all in when it comes to the individual net-net.  I figure the country basket I am assembling is my "large position, concentrated stock" of that country, so that if I buy over time, I may be "averaging down" from the perspective of the overall country basket.  Consequently, if a single stockk were to drop 50% or more, I wouldn't sell it or buy more, but would hold on for my time frame of 3-5 years.

 

I'm just wondering out loud why Schloss did not do much international investing (if I remember correctly, he also wasn't as successful at it).  I've read that he would frequently buy a very small position in the U.S. even before ordering the annual reports/10Ks.  Then, if the stock price drops or he likes what he reads, he may buy more.  Perhaps (1) this strategy of his did not work well internationally, or (2) foreign stock reporting and accounting has improved since his time, or (3) a little of both.  Perhaps someone has some plausible insight regarding my speculative question.  I haven't read much Cundill yet, but it is well-known he was successful with multiple country stocks.

 

My guess is that it was information, culture and accounting.

 

His main information was ValueLine.

 

He deeply understood his companies' products and industry cycles.

 

I do not think he was as comfortable with international companies.

 

Yes, he didn't trust the numbers and beyond that felt there was more than enough opportunity in the US. Agreed on Valueline being at least his initial source of info. I wouldn't say though he had a deep understanding of company products and cycles!  He knew what he needed to know and no more than that.

 

But isn't it just a logistical issue for Schloss? To get an annual report could take a month, and he was afraid to miss out by waiting. As for international stocks, how can he get an annual report in a reasonable amount of time? assuming that it is in english. Buffett said the opportunity is more for us now (esp smallcaps) because of more readily available information.

 

And I buy it mostly all within a week because I am afraid the stock may run away from me. I am buying cheap stocks, so if it drops I don't get greedy, I would be satisfied when it reaches my IV (of course assuming I am right). I don't buy more on the way down with Japanese smallcaps because I may be totally missing something. After all, I am in a learning process with Japanese smallcaps.

 

However with very boring companies that I know better I do buy on the way down. For example, ITIC is a title insurance company selling at a little over book. It dropped after I bought (probably because it was at an all time high) I bought more at 20% cheaper. I can safely do that because how much more predictable can you get than a title company!

 

 

 

 

[randomep]

 

I analyze all quarterlies of all my holdings: here is a summary on my blog (at top are my 3 japanese holdings)

 

http://bovinebear.blogspot.com/2014/08/summer-quarterly-updates.html

[wknecht]

Thanks for the many great ideas west. I'm putting money to work in at least one already.

 

I'm wondering what expense ratios others are running with these? This has prevented me from doing much internationally before. Maybe I need to switch to IB, but at Fidelity it comes to: $30 to buy in Japan, another $30 to sell, plus 1% FX fees (twice assuming I eventually convert back). This comes to a little over 3.5% on initial investment (because my portfolio is not too large and I would keep these positions in the 1-2% range). This also assumes I can get the orders filled in one shot, which is not a given.

 

If these double in a reasonable amount of time, the expenses are still 3% on average investment (much higher on initial), but of course you have a double so who cares. I'm not a huge fan of this logic though because it becomes easy to rationalize any level of expense.

 

I suppose you can spread the FX fee over a few positions assuming you recycle the money into other ideas in the country. I guess this is the key that could make the expenses more manageable. It still would be interesting to benchmark though.

[Hielko]

Fees are way lower when you use IB. You can buy/sell for something like $1, and you can do an FX conversion for $2 or so.

[cobafdek]

Fees are way lower when you use IB. You can buy/sell for something like $1, and you can do an FX conversion for $2 or so.

 

I wonder if or when IB will get called out on maker-taker rebates like TD Ameritrade.  And are there other non-disclosed trading expenses somehow embedded in non-advantageous bid/ask spreads?

 

http://dealbook.nytimes.com/2014/06/17/trader-who-called-markets-rigged-tempers-his-critique/?_php=true&_type=blogs&_r=0

 

Maybe I need to switch to IB, but at Fidelity it comes to: $30 to buy in Japan, another $30 to sell, plus 1% FX fees (twice assuming I eventually convert back). This comes to a little over 3.5% on initial investment

 

If you go with Fidelity, you could rationalize it with a little perspective:  you'd be back to commission rates paid by your grandfather or father ($100 or more per trade) before the 1970's, and that's for domestic U.S. trades.  ($100 is non-inflation-adjusted, so with Fidelity you're arguably doing better than granddad.)  The discount brokers would want us to be grateful, to feel lucky to worry about nit-picky problems like maker-taker rebates, etc.

 

If your portfolio is large enough, you could divide it between IB and Fidelity, or switch between discount brokers every few years, just to do your small part to keep them "honest and competitive."  My guess is that expense ratios, taking into account all non-disclosed charges, would be a wash between the major discounters.

[west]

Thanks for the many great ideas west. I'm putting money to work in at least one already.

 

I'm wondering what expense ratios others are running with these? This has prevented me from doing much internationally before. Maybe I need to switch to IB, but at Fidelity it comes to: $30 to buy in Japan, another $30 to sell, plus 1% FX fees (twice assuming I eventually convert back). This comes to a little over 3.5% on initial investment (because my portfolio is not too large and I would keep these positions in the 1-2% range). This also assumes I can get the orders filled in one shot, which is not a given.

 

If these double in a reasonable amount of time, the expenses are still 3% on average investment (much higher on initial), but of course you have a double so who cares. I'm not a huge fan of this logic though because it becomes easy to rationalize any level of expense.

 

I suppose you can spread the FX fee over a few positions assuming you recycle the money into other ideas in the country. I guess this is the key that could make the expenses more manageable. It still would be interesting to benchmark though.

 

Go with IB.  It's way cheaper.  Not including the currency conversion (which also way cheaper) getting into a position is only $2-$5 for me.  My friend who uses e*trade paid $33 per trade just to get into a position, and there was no guarantees that all of his order would be filled.

 

There's a minimum $10 per month commission, but it is well worth it if you are serious about getting into Japan.  I was nervous about opening an IB account at first, but I've got zero regrets.  I just wish I opened an account with them (and understood the fee structure) earlier.

[Hielko]

Fees are way lower when you use IB. You can buy/sell for something like $1, and you can do an FX conversion for $2 or so.

 

I wonder if or when IB will get called out on maker-taker rebates like TD Ameritrade.  And are there other non-disclosed trading expenses somehow embedded in non-advantageous bid/ask spreads?

 

http://dealbook.nytimes.com/2014/06/17/trader-who-called-markets-rigged-tempers-his-critique/?_php=true&_type=blogs&_r=0

If you go for the cost+ pricing structure you can actually get that rebate credited to your account if you provide liquidity, and you can route orders based on trading rebates if you want. IB is many miles ahead vs the competition imo.

[writser]

Agreed. It's truly a mystery to me why people still use other brokers. If you have a decent chunk to invest it's way, way, way, better and cheaper than all competitors.

[west]

Agreed. It's truly a mystery to me why people still use other brokers. If you have a decent chunk to invest it's way, way, way, better and cheaper than all competitors.

 

To be fair, it is a little intimidating and clunky when I was first using it.  Buying yen?  How much more unintuitive can it get?

 

My cheap side was also put off by the minimum $10 per month per account charge.

 

Then I started actually using it.  No regrets :D

[pocoapoco]

For low prices stocks depending on how much you are trading it can be a lot cheaper to have a fixed cost (Etrade for instance).  So it's worth maybe having two accounts and for low share counts or foreign stocks IB for sure but high share counts Etrade would be better.

 

[west]

For low prices stocks depending on how much you are trading it can be a lot cheaper to have a fixed cost (Etrade for instance).  So it's worth maybe having two accounts and for low share counts or foreign stocks IB for sure but high share counts Etrade would be better.

 

I agree, but honestly for every company I've bought (except Surge Components) Interactive Brokers is way cheaper.  Plus, it seems like e*trade doesn't make a market (?) for the stock when you trade it?  In other words, I'll try buying between the bid and ask spread, and my bid won't show up in the order book (even after waiting a while).  I've even had a situation with a very illiquid stock where the ask dropped significantly below my bid for an all-or-nothing order of a not small, but not large size!  Frustrating!  I'm beginning to think it's even worth using IB with companies where the number of shares you're buying is large so your IB commission will be larger than, say, e*trade just so you can play the market (if the stock is illiquid enough to allow)!

[writser]

To be fair, it is a little intimidating and clunky when I was first using it.  Buying yen?  How much more unintuitive can it get?

 

I don't agree. Splitting out the currency trades vs. the actual stock trades is far more transparent to the end user. Lots of brokers rip you off by charging arbitrary currency conversion fees. And you are clueless about the fairness of the rates they execute at (for example, with dividends paid out in yen, you are completely left at the mercy of your broker for deciding what days' exchange rate to use). And you can't even choose whether you want to hedge currency or not with these other brokers. Ok, maybe it's not intuitive, but I don't think that should be an argument. You should be aware of what is going on under the hood when trading foreign stocks. I have a finance background though. I agree that their interface is quite overwhelming at first - maybe the only drawback of IB.

 

In terms of total brokerage costs for my portfolio IB is really a factor 10 to 100 cheaper than all competitors I have looked at. They wipe the floor with anybody else in terms of trading costs, borrowing costs, direct market access, currency spreads, corporate actions, etc. Frankly if you have more than $50k to invest you are imho completely nuts if you still use TDAmeritrade, Fidelity, Schwab or whatever, except for some niche use cases (penny stocks as mentioned above, and not all foreign markets are available in IB). I have other brokerage accounts for several foreign stocks but I'd close them immediately if IB grants me access to these markets. I don't mind paying a bit more for large penny stock orders because IB seems to be one of the few brokers that doesn't internalize my orders. Like you said, maybe e*trade is cheaper in terms of commission but what's the point if they rip you off with the execution.

[west]

To be fair, it is a little intimidating and clunky when I was first using it.  Buying yen?  How much more unintuitive can it get?

 

I don't agree. Splitting out the currency trades vs. the actual stock trades is far more transparent to the end user. Lots of brokers rip you off by charging arbitrary currency conversion fees. And you are clueless about the fairness of the rates they execute at (for example, with dividends paid out in yen, you are completely left at the mercy of your broker for deciding what days' exchange rate to use). And you can't even choose whether you want to hedge currency or not with these other brokers. Ok, maybe it's not intuitive, but I don't think that should be an argument. You should be aware of what is going on under the hood when trading foreign stocks. I have a finance background though. I agree that their interface is quite overwhelming at first - maybe the only drawback of IB.

 

writser,

 

I wasn't referring to the way you have to buy yen first, separately from buying the shares.  I agree with you.  That should be in two steps.

 

I was more of referring to the user interface.  The whole having to put in a "Sell" order for USD (or whatever currency you're dealing with), then hitting tab or clicking the "go" button to get of ways you can sell USD (this is the clunkiest, most unintuitive part) and only then clicking "sell" to buy yen.

 

I had to email support to figure out how to do that.  And I used write system level software for a living...

 

As a normal (?) human, when I first logged on I wanted to go to a "I want to buy yen" page, not a "I want to sell USD for yen" sub-menu hidden away where I have no idea where to find it.

[writser]

Ah, that makes more sense. Then ignore my rant :) .

 

If I have to trade currency I use the FX trader in Trader Workstation, under trading tools. Maybe that's something for you?

 

It was possible up to a few months ago to trade also the inverted pairs (so JPY.USD instead of USD.JPY) which made things a little bit easier. I agree that it is a bit strange this is no longer possible.

[west]

Ah, that makes more sense. Then ignore my rant :) .

 

If I have to trade currency I use the FX trader in Trader Workstation (under trading tools). Maybe that's something for you?

 

I believe that's what I use too, although I don't know offhand.

[cobafdek]

Hielko, west, writer -

 

Damn good info.  Thanks.

[wknecht]

Thanks for the info. Looks much much cheaper without obvious drawbacks. Fidelity might offer more exchanges, but can keep some cash there too. Not seeing any strong reason not to switch.

 

Am I reading their fees right - if you have 100k in the account they waive the activity fee?

[Hielko]

Correct

[Libs]

Yes, all my Japanese holdings on the back burner.  I'm going to get kicked out of being a value investor for what I say next but here it goes..

 

With these stocks I basically ignore them.  I log in and look at their price a few times a week.  If the stock suddenly starts to appreciate I'll look and see if there's a filing or news release.  If the price drops like crazy I'll look at their results as well.  Otherwise I do nothing, literally nothing.  I have a few that have been mostly flat or slightly down for two years, I haven't looked at their financials since I purchased.  If I did I know what I'd see, a company that hasn't really changed since I purchased it.

 

As west said just sit back and enjoy the ride.  These things do appreciate given enough time.  Sometimes it's quick, I've had a number go up 50-100% in a matter of days or a week.

 

Wanted to thank all for these great Japanese threads, especially West and Oddball.

 

A little dash of cold water....

 

Jim Grant seems to have applied these principles - net- nets, profitable, dividend payers - and basically treaded water in Japan for 12 years. He (ruefully) invokes Graham and Dodd in this video.

 

http://www.businessinsider.com/jim-grant-japan-2010-10

 

 

I'm sure many of you are familiar with this...it's just a reminder of how frustrating this approach might be.

 

(It isn't stopping me, though).

 

 

 

 

[west]

Libs,

 

If I remember right, I saw that video in late 2012.  It was one of the reasons why I was convinced to stay out of Japan in 2013.  Whoops.

 

To give Grant credit (and whoever else made me initially wary of just doing, say, net-nets in Japan), because of them I spent a *lot* of time researching different strategies, beyond just net-nets, low P/B, etc., to see which ones really seemed to consistently work.  All of my posts meet the "stats show a catalyst based on what's been previously seen in the market" requirement, which is typically, but not exclusively, having a low P/B with a medium to high BVPS growth rate, and a high and stable ROIC.