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Since the list was published by the TSE, many of my names have absolutely flown.

The #1 performer is now Terasaki Electric (6637) which went up from 1,779 to 2,420 and is now up 94.5% since my purchase.

Sanyo (5958) is up from 2,669 to 3,495

Kinki Sharyo (7122) is up from 1,748 to 2,271

Yamada Corp (6392) is up from 4,111 to 5,490

Fuji Sangyo (9906) is up from 2,389 to 2,678

#s are since my last post.

Other names have increased as well, but many remain cheap.

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Any new positions or stuff you're adding to? I also took a basket approach and also weight more heavily dividend payers (to cover the JPY margin loan at IBKR). One position I have which I am not sure is in your basket is R C Core (7837).

Cheers and glad to see you continuing to post on this.

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I added Nissin, which I mentioned in the article and tweeted about when I added it. Not as "deep" value, but dirt cheap and doing big buybacks. It became a mid sized position for me in the basket.

I've been looking at other names too and have starter positions in a bunch. This basket is already a majority of my portfolio, so limited room to just add on the way up. I may shuffle some around though, downsize some that ran up like crazy, but many are still very cheap.

Was in Tokyo for all of January and early February, so did less research, but I'm comfortable with my names currently. Will look into 7837 though! Thanks! I enjoy reading about these companies even if I end up passing.

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Yeah fair enough - I was in for 2 weeks late Dec/early Jan (Tokyo & Niseko). I'm also looking at some new positions as well - I aim to have this as around 25% max of my portfolio. Will post anything I find interesting. Cheers

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Sanyo (5958) is not on the list even correct?

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author

Correct. Takes 2 seconds to check yourself. I linked to the list in the article. And you can see it yourself here too https://www.jpx.co.jp/english/news/1020/o4sio700000059el-att/list.xlsx

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Altay, you've been remarkably consistent in your perspective on undervalued Japanese equities, and I've thoroughly enjoyed following along. Regulatory changes causing real actions have caused me to step back and consider that I might actually have to reevaluate being on the sidelines and establish a basket of such names. Looking forward to your future updates.

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I think there's a problem with deep value investors in the west who're are used to a more M&A and activist friendly environment that tends to close a value gap incredibly fast, even for stocks that have worse asset and earnings quality than many Japanese stocks. I'm mostly a bank investor in the US market (with a few JPY positions) i see the same on this side of thing, sometimes you will have to wait 5 years to close a deep discount with no catalyst in sight and most investors will throw in the towel, even if it has 10-20 years of historical profitability/asset quality etc. It's really hard for me to say I'd rather own a net net in the US that has losses vs a Japanese one that's a double net net or at net cash with 10+ years of free cash flow but that's how a lot of folks here feel like. Great post, always excited to read.

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So long as value compounds over long periods of time and they dividend out 2% ish, I'm happy to hold. Japan has had a history of value traps so investors clearly stopped looking all together, which is how we reached such egregious levels of undervaluation. Happy to see the government and exchange working to change management's attitudes though, which in and of itself will create value.

I've looked at a lot of U.S. banks a while ago and found the space interesting, but I just don't feel comfortable holding financials long term. They could do something stupid and blow up, but then again retail banking isn't complicated and with disclosures easy to see if there are any obvious risks. The sector of U.S. banks that are more insteresting imo is the ECIP receipients. Amazing that the opportunity existed for anyone paying attention to buy-in before they ran up so much!

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Shareholders should contact IR for their Japanese co's trading at discounts asking why they aren't on the Tokyo Stock Exchange list of companies complying with their requests. I did for my entire port with respectful emails (JP via ChatGPT) asking what customers and biz partners would think about them ignoring rules. Super friendly /w link to rules.

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What about buying whole etf of small caps like SCJ?

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That will have nearly zero exposure to this theme. SCJ on average trades ABOVE book value. The names in my portfolio trade between 0.3-0.6x p/tbv. There is no 'easy' way to play this theme other than buying names individually on the Japanese exchange.

No ETF gives exposure to this theme.

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Have you looked at JOF? I'm sure it's less focused than buying specific names that you select on your criteria, but it looks like its more in the ballpark than the ETFs. I don't own it yet, but I'm strongly considering it.

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Feb 20·edited Feb 20Author

Yes. It's better since it trades at a discount to nav (common amongst CEFs).

Top position is 0.7x p/tbv followed by 0.6x, 0.7x, 2.2x, 1.2x, 1.7x, 0.9x.

It's better than the ETFs, but still nowhere near as good as just buying the names yourself as you can build a good portfolio that averages 0.5x p/tbv easily. Or lower if you want deep value.

Not to say their portfolio is 'bad', but the Japanese improved RoE/corporate governance theme is best represented by the cheapest p/b stocks.

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I agree with you, but I can only deal with so many names and I already have more on my plate than I really want. But I'll think about it.

Thanks!

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Fair enough. I think this is the case for many investors. I took a basket approach, so I don't know every name super intimately.

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