Japan Value Equity

Investment Philosophy

We seek to generate high returns through a long-term, contrarian approach that identifies undervalued companies likely to undergo transformation.

The mature nature of the Japanese economy makes its stock market highly cyclical, allowing seasoned investors to take advantage of repeated patterns. In this type of market, a consistent application of contrarian value-oriented investment is the most effective way to generate excess returns. We aim to benefit from opportunities in which stocks are revalued by the market.

Examples of undervalued companies that are expected to undergo transformation include:

• Those in “crisis mode” where poor standing in the market compels management/employees to make fundamental changes
• Those whose mindset is changing toward enhancing corporate value
• Those with attractive potential that may be priced into the stock price in the future

Companies that offer goods and services needed by society will generally have business continuity, offer downside protection, and are likely to possess a turnaround catalyst, even if they are temporarily undervalued. Our research seeks to identify such companies that demonstrate these three attributes.

Experienced Team with Long Track Record

Shigeru Aoyagi is the Team Leader of the Value Strategy Fund Management Team. He started his career with Nikko Securities in 1986, then joined Nikko International Capital Management (now Nikko Asset Management) in 1995. He has been the lead portfolio manager of the Japan Value Equity Strategy and its primary decision maker since its inception in 1996.

The Value Strategy Fund Management Team has extensive experience in Japanese equities and includes four portfolio managers and three value analysts (one of whom concurrently works as a portfolio manager). The Value Team is also supported by Nikko AM’s robust equity research platform, consisting of a team of experienced sector analysts.

Key Characteristics

Focus on Turn-Around Catalysts

We seek to understand whether poor stock performance is due to a structural or cyclical issue, and invest in companies that we believe are underperforming due to structural issues, but possess a turn-around catalyst—what we call "Phase 1" stocks, which are the main focus of the strategy and comprise around 60–70% of the portfolio*.

“Phase 2” stocks are companies that resolve their structural issues in Phase 1 and start to generate positive cash flow in Phase 2. They comprise approximately 30–40% of the portfolio*.

* Weightings of Phase 1 and Phase 2 stocks are subject to change, depending on market conditions.

Investment Process

Featured Videos

Japan Value Investment
Philosophy and Strategy
Shigeru Aoyagi, Chief Portfolio Manager

Japan Value
Portfolio Characteristics
Shigeru Aoyagi, Chief Portfolio Manager