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

Is it OK to buy Scottish Mortgage investment trust again?
Investment trusts

Is it OK to buy Scottish Mortgage investment trust again?

Scottish Mortgage investment was hit hard by the tech-stock crash, and it is still being buffeted by headwinds. Should new investors wait for those to…
5 Jul 2022
M&G offers a solid 10.1% yield – but future growth is uncertain
Share tips

M&G offers a solid 10.1% yield – but future growth is uncertain

Financial services group M&G has one of the highest dividend yields in the FTSE 100. But it’s a complicated company, and a tough one to analyse, says …
4 Jul 2022
The income investor’s dilemma
Income investing

The income investor’s dilemma

Pay attention to dividend growth as well as initial yield when picking income trusts, says Max King.
4 Jul 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022

Most Popular

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022