When I started my career at Daiwa Securities America’s US equity department in 1996, my first client was a portfolio manager of a mid-sized Japanese insurance company. He was a believer in technical analysis. My sales calls with him were quite odd along the following line:
Me: Good morning, Mr. Sato (not true name, of course), I think regional banks like Bank of Boston (Ticker: BKB) are attractive investments because deregulation will drive consolidation. BKB may be acquired at a large premium.
Mr. Sato: That sounds interesting. Let me see the chart of BKB. Hmm…. I think the A wave is over and the B wave just started. Don’t you think, Yasu-san?
Me: (I have no idea what these waves mean) Yes, yes, I think so, too. Definitely B. So, that means we should….
Mr. Sato: BUY. Definitely buy. Buy me 5,000 shares of BKB at market, Yasu-san.
Me: Yes, sir. Buy 5,000 shares of BKB at market. Let me call you right back.
As an analyst, most of my time is spent deepening my understanding
of our portfolio of companies and researching potential new investment
candidates. But every once in a while, I
meet with investors in our fund. They always ask “how do you come up with new
ideas?” After my deer-in-headlights stun
wears off, I usually give a rambling, incoherent monologue and it is a miracle
if they don’t pull out their funds immediately.
Engagement is the new buzz word in Japanese fund management. Firms such as Neuberger Berman and UBP have launched new engagement funds, and many institutional investors have created dedicated departments to focus on engaging with companies. We are often asked if we are an engagement fund because we have a concentrated portfolio. But for us, engaging with a company is just one of our tools, and not the end goal of the fund.
The day after my college graduation, my roommates and I were packing up to leave. One roommate was preparing to drive halfway across the country to home and deciding what would fit in his car. He asked if I would make an offer for his loose change jar.
I had seen him depositing pocket change into the jar for the last 4 years each time he came home for the day. I had no idea how much money was in there, but offered $20, thinking that was a safe bet. He accepted. Two days later I took it to a Coinstar machine at my local supermarket, which converts your coins into bills for a 10% fee, and walked out with $180 in my pocket.
This was a powerful lesson in the value of taking the other side from a forced seller, even under conditions of uncertainty.
Mr. Henry H. Arnhold died on Friday August 23rd, 2018. He was 96 years old. I met Mr. Arnhold in 1998 when I joined Arnhold and S. Bleichroeder, Inc., a predecessor firm of First Eagle Investment Management. Around that time, he was not actively involved in day-to-day management of the company, and instead focused on managing some family accounts and DEF Associates. DEF was comprised of a fund of George Soros’ Quantum funds, in-house funds, some outside funds, and some direct investments. At that time, Quantum funds were not taking new capital, but traded on secondary markets. Some funds traded at huge premiums to their NAV such as Nick Roditi’s Quota Fund, which carried a premium as high as 80%.
I recently visited Sequoia and Kings Canyon National Parks in California. I have been fascinated with forests since reading The Hidden Life of Trees , which illuminates the intricate complexity of these ecosystems.
Sequoia is one of the oldest parks in the country and home to the giant trees that have made it famous. Sequoias are the largest organisms in the world and only grow on the western slopes of the Sierra Nevada Mountains at elevations above 4000 ft.
In 1986, my grandfather, Koichiro Yasu (安 弘一郎) wrote a book about the origins of my family and Jyujiya Securities Co. Ltd., (十字屋証券) our family brokerage firm, which was originally started by my great grandfather, Tsunesaburo Yasu (安 常三郎), in 1924. Late in life, Koichiro was diagnosed with liver cancer and knew his remaining life was not long. Instead of going after his bucket list, he wrote a book to share his experiences with other family members and people in the brokerage industry. We privately published the book and distributed it at his funeral (so you won’t find it on Amazon). Read More >
Jiro Yasu of VARECS Partners describes why capital allocation at Japanese companies is often abysmal, the extent to which that’s changing, key lessons learned from First Eagle Investment’s Jean-Marie Eveillard, why he has the perfect name for a value investor, and what he thinks the market is missing in Medikit, EM Systems and CRE Inc.
After 10 years working in New York, much of that at First Eagle Investment Management, Jiro Yasu returned home to Tokyo in 2005 to take over his family’s brokerage business. Pivoting from that long-held plan, however, he decided the family should sell the brokerage and that he would instead start a value-investing firm, co-founding VARECS Partners in 2006.Read More >
We love to meet foreign value managers. We are often impressed by their global view, deep knowledge of many different industries, and their unique take on Japanese companies. Also, they speak the same language as us. We cannot find many Japanese market participants who speak the language of value investing. So, by talking to them, we feel less lonely as value investors in Japan.
Over the last few months, we had the opportunity to meet with several such managers, from both large firms and smaller boutiques. Although they each have slightly different investment philosophies, all of them believe that investing in carefully selected Japanese companies will generate strong returns going forward because of low valuations despite the high quality of the businesses. Read More >
In September 2013, I visited the 150-year-old sake brewer Fujii Shuzo, in Takehara city, an old town in Hiroshima prefecture. Ryusei, Fujii’s premium sake, is carefully hand-brewed without the use of chemicals and is known as one of the best sakes in Japan. A couple of months later my family ended up buying Fujii but at the time of my first visit, I had no idea it was even for sale.
There are about 1,600 sake brewers in Japan. Usually buying a sake company is virtually impossible. Most are owned by wealthy and respected families in the region. Fujii’s 150- year history sounds long by most standards but it is still quite young for the sake industry. Nakashima Shuzo, a sake company in the Gifu prefecture, has an over 300 year history. Read More >