Is the time ripe for Japanese growth stocks? Donald Farquharson is Baillie Gifford’s head of Japanese equities and knows the market better than most. In the latest episode of Short Briefings on Long Term Thinking he draws on a recent visit to the country to explain why conditions seem favourable for a cohort of domestic companies with long-term mindsets.
Background
There’s a sense of renewed confidence and enthusiasm in the air in Japan. The country is home to the world’s second-largest market for equities after the US, but it doesn’t get a corresponding degree of attention from international investors.
The reason is partly because of the nation’s past weak economic performance. But a recovery is underway, and critically, many of its growth stocks have strong balance sheets, big ambitions and a positive story to tell.
In this episode, Baillie Gifford partner Donald Farquharson draws on his experience of investing in Japan since 1990 to explain why he’s particularly optimistic about the opportunities ahead for a select group of companies. They include the medical equipment maker Olympus, the car components manufacturer DENSO and the takeover advisory service Nihon M&A Center.
He also shares why he thinks some misunderstand Japan and why it’s no coincidence that many of the companies he backs are founder-run.
Resources:
Discovering the unsung superstars of Japanese technology
From Yahoo! to Z Holdings: the evolution of an online pioneer
Japan: the small businesses with big opportunities
Investing in Japan: distance lends perspective
Donald Farquharson’s LinkedIn page
Aiming High: Masayoshi Son, Softbank Group and Disrupting Silicon Valley
Timecodes:
00.00 Introduction
01:40 Investing in Japan in the 1990s
03:00 ‘Undiscovered’ Japan
03:55 How banks and other businesses changed
05:30 A sustainable recovery?
06:45 An exciting time for growth companies
07:45 Strong balance sheets
08:15 Olympus and endoscopes
09:45 Diversity on the board
11:00 Nihon M&A Center and company takeovers
12:50 DENSO, a major supplier to Toyota and others
14:30 Toyota City, home to one million people
15:35 Competition for car batteries
16:30 Baillie Gifford’s advantage in Japan
17:45 Looking beyond the headlines
18:20 Book recommendation: Masayoshi Son and Aiming High
19:45 Investing in founder-led firms
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