Investors are ignoring these three cheap Japanese gems

Professional investor Joe Bauernfreund of the AVI Japan Opportunity Trust selects three cheap Japanese shares.

A professional investor tells us where he'd put his money. This week: Joe Bauernfreund of the AVI Japan Opportunity Trust selects three cheap Japanese shares.

We seek out companies that are overlooked, unloved or ignored by mainstream investors. These stocks have been marked down as a result of particular circumstances that we think are unlikely to persist. Asset Value Investors (AVI) has a global focus but we have a very strong belief in Japan. Last year we launched a dedicated Japan fund, AVI Japan Opportunity Trust (AJOT).

Japanese companies have an abundance of cash, driven by strong profit growth and historically low payout ratios. However, the culture of locking cash away and ignoring shareholders has been changing since the introduction of the Corporate Governance Code in 2015. Companies are unwinding cross-shareholdings, buying back record numbers of shares and raising dividends. Yet, despite the clear progress, valuations are still depressed. There are many opportunities in high-quality, cash-rich, small Japanese companies that the market is unfairly neglecting. Here are three examples.

SK Kaken: painting a pretty picture

SK Kaken (Tokyo: 4628)

Secom Joshinetsu: alarmingly cheap

Secom Joshinetsu (Tokyo: 4342

Fujitec lift maker in bargain basement

Fujitec (Tokyo: 6406)

Recommended

Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
19 Feb 2021
Three winning stocks for a post-pandemic world
Share tips

Three winning stocks for a post-pandemic world

Professional investor Dan Lane of Freetrade selects three stocks that he thinks will keep their relevance in a changing world.
1 Mar 2021
DR Horton: US housebuilder that's piling up profits
Trading

DR Horton: US housebuilder that's piling up profits

US housebuilder DR Horton’s stock rests on firm foundations and looks cheap. Matthew Partridge looks at the best way to play it.
26 Feb 2021
Investing beyond China: how to buy into wider Asian markets
Investment trusts

Investing beyond China: how to buy into wider Asian markets

There are several reasons to be sceptical about China’s development, says Max King. What’s more, there is vast potential in other regional emerging ma…
26 Feb 2021

Most Popular

A beginner’s guide to bitcoin: what is bitcoin?
Bitcoin

A beginner’s guide to bitcoin: what is bitcoin?

As a completely novel concept for many people, bitcoin can take a little effort to get to grips with. In the first of a short series on the cryptocurr…
1 Mar 2021
A beginner’s guide to bitcoin: how to buy bitcoin
Bitcoin

A beginner’s guide to bitcoin: how to buy bitcoin

For the novice, buying bitcoin can be a daunting prospect. Here, Dominic Frisby outlines the process from start to finish.
2 Mar 2021
What is “yield curve control” and why is it coming to a central bank near you?
Government bonds

What is “yield curve control” and why is it coming to a central bank near you?

Central banks around the world are determined not to let interest rates go up too quickly or by too much – a practice known as “yield curve control”. …
1 Mar 2021