OPERATING STYLE

Portfolio Construction

  1. Long term strategic holdings

    A portfolio is comprised of a relatively few number of stocks (approx. 30-40), the majority of which are strategic, long term core stock holdings (80%), which are held for 2 to 3 years. The remaining stocks are tactical holdings (more focused on short term factors) which are usually held for six months to a year.

    All are high growth stocks trading on "reasonable" PE multiples generating good cashflow and having well capitalized balance sheets.

  2. Realization of return over the long term

    By sector, overweighting is given to those companies that are exploiting Japan's service and retail/distribution transformation.

    This portfolio construction style has resulted in superior investment returns, lower turnover, lower transaction costs, and lower volatility except in times of overall market collapse.

  3. Risk Control
  4. Both the Buy discipline and Sell discipline (see below) are integral parts of the risk control process. Close monitoring of business fundamentals helps to limit stock specific risk. However due to the concentrated nature of portfolios both in terms of number of stocks and concentration to 'New Japan' sectors, there will be periods when performance will be very marked or divergent contributing to high volatility of returns relative to the benchmark returns.


 
Features
Capture the immediate investment potential in well recognized and well capitalized Japanese companies which have high profit growth and reasonable PE multiples
Provide active value added portfolio management based on ongoing fundamental company analysis with particular attention paid to projected earnings growth at good relative value
Overweighting high growth sectors (i.e., service and retail/distribution) that are a part of the New Japan's service, consumption, and distribution revolution
Underweighting higher risk or volatile sectors (e.g., electronics, commodities)
Focus on long term, strategic stock picking at the expense of tactical, short term stock picking, thus enabling low turnover and a concentrated portfolio
No currency hedging

Buying Discipline

 

From an ongoing analysis through Mr. Shiozumi's extensive information network, stocks are screened: first for high profit growth past, present, and future (+20% recurring profit growth); and secondly for theme exposure to marketing concepts that exploit a New Japan.

After thorough screening, the team visit high potential companies and interview competitors before a buy decision is made.

Selling Discipline

  Mr. Shiozumi regularly reviews: stock price vs. a preset target; PE multiple vs. profit growth; any significant deterioration in fundamentals as well as company management changes; competitive information that may result in a loss of “edge”; and general business environment to assess any changes that impact upon company sales and profits. If one or more factors of this review process is unsatisfactory, selling takes place.

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