Assertion Not checkable as stated
U.S. investors get better access to Japanese CEOs than Tokyo-based funds
“Pre-COVID, I was actually getting better access to the senior management of Japanese companies here than I ever did in Japan.”
Opinion
Large-cap Japanese valuations still fail to reflect massive improvements in corporate governance
“And you can find companies that are buying back two, three percent of their shares outstanding, paying out 50% of the net profit in the form of a dividend, just still trading on 10 times earnings and four and a half or five times EB to EBITDA. So there's a dis…”
Opinion
Smith: Japanese equities feature world-class companies trading at steep valuation discounts
“So I think Japan has a growing number of world class companies that have world class governance structures, world class capital allocation decisions, but yet do not trade at world class valuations.”
Prediction Not checkable as stated
Smith: Japanese equity de-rating process is near the end
“But I believe we're very deep into that de-rating process now. And we're a lot closer to the end of it than the beginning of it.”
Opinion
Smith: Corporate Japan is in a much healthier state than 30 years ago
“I think we've at last worked through that now, and corporate Japan is in a much, much healthier state than it was 30 years ago.”
Assertion Supported
Smith: Value investing was the predominant model in Japan from 1992 to ~2015
“The period from 1992 after the initial bursting of the bubble really
Up until I think the global financial crisis and beyond, until we got into a global era of zero rates around 2015 or 20 16, value investing was the predominant form of investing, and certainl…”
Opinion
Smith: Tokyo's investment landscape is dominated by platform hedge funds
“If you look at the world of investing in Tokyo today, you know, it's dominated by the platform hedge funds.”
Insight
Smith: Trading outside local market hours shields investors from intraday noise
“Being out of a live market also, I think, is very beneficial to me. The market here opens at five p.m., so I have all day to think and strategize and speak to analysts and read reports and really not get bound up in the babble of the day-to-day tick watching o…”
Insight
Domestic macro conditions are often irrelevant to Japan's globally exposed companies
“What's happening in the Japanese economy isn't directly relevant quite often to their Futures or their revenue streams or their margins.”
Insight
Smith: Japanese competitive moats are often driven by R&D and patents
“Typically it will involve some description of the moat around a company, the barriers to entry, and that's often, in the case of Japan, R&D driven, or technology driven, or it can be patent driven, some sort of intangible asset that's very hard to recreate.”
Insight
Smith: Japan is largely a B2B investment opportunity rather than B2C
“Japan is largely these days a B to B investment opportunity. As opposed to a B to C. I mean, of course, there are B to C companies in Japan, and there are very big brands. Japan has some amazing brands like Nintendo and Sony, but a lot of the high value-added …”
Insight
Smith: Information Produces Edge Until Marginal Utility Turns Negative
“Drawing the line when the marginal utility of an extra unit of information is no longer positive, I think is an important skill because you can get yourself very confused and you can drown in too much information. So drawing the line on what makes sense and wh…”
Opinion
Smith: Japan is a two-tier market ideal for long-short investing
“It is a two-tier market. There are still companies which are not well-governed, which make bad capital allocation decisions, which have very low return on equity. I think it's an incredibly interesting opportunity set for long-short investing, actually. There'…”
Opinion
Smith: 2014-2015 Stewardship and Governance Codes kickstarted capital allocation improvements in Japan
“But I think the advent of the corporate governance code and the stewardship code in 2014 and 20 15 Really kickstarted an additional improvement in governance and capital allocation.”
Assertion Not checkable as stated
Smith: Majority of Indus Japan fund holdings generate most revenue outside Japan
“If you look at the Japan funds that I manage, the majority of the companies in which we invest are global businesses. They're domiciled in Japan, but they generate the majority of their revenue outside Japan.”
Assertion Not checkable as stated
Japanese companies play a critical role in leading-edge semiconductor manufacturing
“Japanese companies are absolutely critical players in the value chain for semiconductor production. Whether it's the production equipment that's used in lithography or etching or inspection or cleaning or dicing or whatever it may be, or whether it's the mater…”
