Corona Investing part III, Life is a Beach! 南の黒船に投資と健康マネジメント！

Dear Readers, 

It's hard to believe that it has been over half a year since the fateful US election in November!  Markets have been rather buoyant since the election, rising 23% at the S&P 500 and 24% at the Nikkei 225. This continues the bullish trend since the pandemic bottom in March last year, albeit a more mundane upswing.　日本語版はしたにあります。　　 

There has been market commentary about a strategic shift from growth to value, which we mentioned in our last note. Moving money from high-tech names like the FAANG stocks to more traditional blue chips such as P&G, JP Morgan, and Toyota. Looking at valuations and stock charts, it does feel as though the upside for the market is limited in the near term. In this kind of environment, you may consider a regular monthly investing strategy, which my firm can help you with. This type of strategy allows you to drip feed your savings in and protect yourself from the volatility in the markets. Please see the excellent below article on Dollar Cost Averaging. 

https://argentumwealth.com/benefits-of-a-regular-savings-plan/

Meanwhile, if you need some help picking individual value names, take a look at Hitachi (6501), Nissan (7201), Toyota (7203), Nippon Yusen (9101) in Japan, and JPM, P&G, Home Depot in the US. Happy to discuss with you. Send me a message at david.r@argentumwealth.com please. 

On a personal note, we have moved to our beach house in Shimoda 10 weeks ago, and it is pretty awesome. I lead a duo-life helping Japan residents with wealth management in our Argentum Tokyo office 2 days a week, and remote work including health management in Shimoda the remaining days of the week. 😎 

People are super nice and friendly down in Shimoda, which is another hidden benefit of escaping the big city. Please visit us in Shimoda for triathlon training, BBQ, great views, and general health management when you have a chance! 

皆様

11月のアメリカ大統領選挙から半年以上過ぎまして驚いた！ 選挙以来、市場はかなり好調で、S&P 500 で 23%、日経 225 で 24% 上昇しました。

成長から価値への戦略的シフトについてのそれぞれの株アナリストはコメントしています。 FAANG 株のようなハイテク企業から、P&G、JP モルガン、トヨタなどの伝統的な優良株に投資金額をシフトしているようです。 バリュエーションや株価チャートを見ると、短期的には市場の上昇は限定的であるように感じます。 このような環境では、定期的な月次投資戦略（積立口座）を検討してみてください。私の会社がお手伝いできます。 このタイプの戦略により、貯金をドリップして市場の変動から身を守ることができます。 ドルコスト平均法については、以下の優れた記事を参照してください。

https://argentumwealth.com/benefits-of-a-regular-savings-plan/

一方、個別銘柄を選択するの興味がある場合は、日本の日立 (6501)、日産 (7201)、トヨタ (7203)、日本郵船 (9101)、および米国の JPM、P&G、Home Depot を参照してください。 いつでも喜んでご相談させていただきます。 david.r@argentumwealth.com までメッセージを送ってください。

個人的には、10 週間前に下田のビーチ ハウスに引っ越してきましたが、かなり素晴らしいです。 私は東京のアージェンタム オフィスで週 2 日、ウェルス マネジメントで日本にいる人を支援するデュオ ライフをして、残りの週は下田で健康管理を含むテレワークを行っています。 😎

下田の人々はとても親切でフレンドリーです。これは、大都市から逃れることのもう 1 つの隠れた利点です。 トライアスロンのトレーニングやBBQ、絶景、健康管理全般など、機会があればぜひ下田にお越しください！

 #wealthmanagement

#healthmanagement

#下田吉佐美大浜

#shimoda

#izu

Upside-down Investing, Gold, Bitcoin, COVID plays, Value stocks: Nissan (7201), JFE (5401)

 

Dear Readers,                                                                                                                                   

Hope you are enjoying this seasonal change in weather in Japan or elsewhere, and the post-election rally. It goes without saying that 2020 has been an upside-down year for living and investing. As the physical economy grinds to a halt in the west, and retail, F&B, and tourism sectors suffer, the stock market rally continues on anticipation of more fiscal and monetary stimulus. When the roller coaster US election results trickled in two weeks ago, markets were once again off to the races after a pre-election sell-off. Hopes of a COVID vaccine at Pfizer and BioNTech stoked markets just after the election as well. It’s a goldilocks scenario politically in Washington D.C. They say that Biden won’t be able to raise taxes with a Republican Senate retaining power, but he may well stimulate the economy with spending increases. No one mentions or cares about that poor fiscal deficit, but alas, as long as they turn the machines back on!

PRESIDENT

Biden/Harris

306

Trump/Pence

232

U.S. SENATE

Democrats

48*(+1)

Republicans

50(-1)

U.S. HOUSE

Democrats

221(-8)

Republicans

209(+9)

 Source: RealClearPolitics   https://www.realclearpolitics.com/

What’s a person to invest in during this upside-down year? Warren Buffet is buying gold! He may be on to something as some of the smartest investors (Druckenmiller, Dalia, Tudor Jones, etc.) are also scooping up gold citing the “inflation trade” and excessive central bank easing. I also own gold, silver, and recently picked up Buffet’s holding Barrick Gold (GOLD) when it dipped last week. You should probably keep some gold or precious metal in your portfolio in these turbulent times.

What Drukenmiller and others are even more interested in is bitcoin. Drukenmiller has said recently, “I own many, many more times gold than I own bitcoin, but frankly if the gold bet works, the bitcoin bet will probably work better because it’s thinner and more illiquid and has a lot more beta to it.“ The limited bitcoin in circulation versus the massive interest certainly is enticing. Of the 18 million bitcoin in circulation, supply increases by a mere 0.9% per year. This bitcoin rally does remind me of the mania of three years ago when every other guy at a party was talking about it. Is it 2017 all over again or does it have legs this time? The difference this time is the lack of mania surrounding 2017 ICO (Initial Coin Offerings), more pro investors looking closely at bitcoin, and more demand. We will have more on bitcoin in future months, but it wouldn’t hurt to own some crypto for the long term. 

Some follow up on names mentioned in July related to COVID. 

e-learning: Last time we wrote about two education companies, 2U (TWOU, Nasdaq), and Edulab (4427). Both firms provide education services and materials over the web and had rallied since the March bottom, but continued to outperform since July. Edulab had strong earnings in Q2 and raised its full year OP forecast by 22% to Y2.2bn. The stock soared in August/September before coming back to earth, but it is still up 20% since July. TWOU rallied into the summer but has tapered on talks of a vaccine.

Masks: We also touched on three mask companies in Japan, all micro-caps. Kawamoto has been a winner so far, while Shigematsu and Koken had brief moments of glory, but have been relatively flat recently. 

Shigematsu (7980), high industrial use mask market share. The stock is up 3% since July.

Koken (7963), #2 mask maker. The stock is down 1% since July.

Kawamoto (3604), masks and medical supplies. Kawamoto popped last week on huge earnings and an upward revision to its full year forecast, raising OP forecast 66% to Y1bn from Y400mn. Reasons for the revision were higher than expected demand for infection control products owing to the coronavirus. Sales of masks and hand sanitizers to China and domestically exceeded expectations. The stock is up 43% since our July note. 

Final word on sectors: Its been tossed around Wall Street that there is market sector rotation from growth to value stocks following the election and vaccine news. Or is this simply a wall of central bank money trying to find a home in the stock market? Whatever the reason, extreme beaten-down names such as Nissan (7201) and JFE (5411) come to mind. Nissan (0.5x PBR), the #3 Japanese automaker, trades like a distressed stock at a massive discount to Toyota and Honda, but it ain’t going bankrupt. Nissan had better than expected results last week and may divest its stake in Mitsubishi Motors. JFE trades at a 0.3x PBR (Nippon Steel 0.48x) after it halved in the first half of this year, trading in a tight low range for the past 6 months. With more vaccine news coming in day after day, these beaten-down industrial names should do well. 

Until next time, good luck and happy thanksgiving! 

Please remember to contact me if you have any questions on investing. My firm Argentum can help you put your hard-earned money to work. 

https://argentumwealth.com/

All the best,

David

 

 

Stocks during a pandemic

Dear Readers,

Hope you have been well and are staying safe. It has been over a year since I last wrote on Japan investing as I took a one-year hiatus into investor relations at a publicly traded hotel group called Red Planet. That didn’t end well as you might have gathered! The hotel was already suffering amidst oversupply of hotels in 2019 and the Korea/Japan trade dispute. The abrupt halt in tourism in February after COVID-19 paranoia went viral was the nail in the coffin. All hotels in Japan were closed in April for several months as tourism fell off a cliff. In both April and May, inbound visitations to Japan were down 99.9% YoY, which was a mere 1,700 visitors in May. Several hotel chains have already filed for bankruptcy including big names like First Cabin and WBF. There were 25 bankruptcies at hotels nationwide in April alone.

With all the distress out there in the tourism industry, there may be opportunities for the stronger players in hospitality. I have in depth memoirs of the hotel and real estate sectors. Please let me know if you would like to discuss. When I joined the Red Planet last year, I wrote a 10-page report on the Japan hotel sector which highlights the main listed and unlisted hotel chains. Resorttrust, Kyoritsu Maintenance, Amaze, and AB Hotels are listed names in Japan discussed in the report.

How does the savvy investor navigate the wonderful world of equities during a pandemic? On the LONG side, you have a tsunami of central bank liquidity, as well as fiscal stimulus to corporates and individuals. On the SHORT side, you have record setting unemployment in the US, bankruptcies in tourism, retail, and other brick and mortar businesses, and downright fear to leave the house. Markets are rallying on the stimulus from central banks, but does this disconnect with the bearish sentiment on main street retrace itself in the months ahead?

Here is some food for thought on sector ideas:

e-learning: Take a look at these two education companies, 2U (TWOU, Nasdaq), and Edulab (4427). Both firms provide education services and materials over the web, which is extremely attractive during a pandemic. Both names have rallied since the March bottom, but continued news flow on a second wave of virus infections should be a tailwind for their businesses. Even if the CV tapers faster than expected in the coming months, these two names should benefit from the “new normal” in terms of online interaction. Japanese public schools are behind the curve when it comes to distance learning, and were reluctant to implement an online curriculum when schools closed in early March. Thus, the shift to online learning would be a drastic structural change and could be huge upside for companies well placed in the education sector.

In businesses, we see companies such as Fujitsu, Hitachi, Toshiba, and Sony have proliferated the work-from-home (WFH) lifestyle. In February, Fujitsu was able to reduce the number of office workers commuting to its offices by 80%. It will also save money by terminating some rent contracts for office space. This new normal could translate into the education sector.

Corona virus masks: As mask makers, these three micro-caps below have high sensitivity to news flow on the virus.

Shigematsu (7980), high industrial use mask market share.

Koken (7963), #2 mask maker.

Kawamoto (3604), masks and medical supplies.

That’s it for now.

Happy hunting and let me know if you have any comments or questions.

All the best,

David

PS. For prior stock ideas, please reference the Facebook page “Japan Investing” which includes ideas on Hitachi High Tech (8036), Asahi (3333), and many more small caps.

https://www.facebook.com/groups/1800411803521672/