Some Updates on the First Full Year of COVID

COVID hit most of the world starting in March 2020. So, many companies have (almost) had a year of impact from COVID. Many Japanese companies end their accounting year in March and thus their year coincides almost exactly with the start of COVID. So, their annual results will be able to tell us a lot about the true extent of the world's business slowdown.

Tachibana Eletech (TSE:8159) year end revenue is expected to fall 6.2 % to ¥ 160.0 B (2020 ¥ 170.5 B). Year end EPS is expected to fall 26.0 % to ¥ 128.8, (2020 ¥ 173.9), which implies a 13.0 x earnings multiple.

Riken Keiki (TSE:7734) Year end EPS is expected to fall 19.4 % to ¥ 150.5, (2020 ¥ 186.8), which implies a 20.4 x earnings multiple.

Takamatsu Machinery Co.,Ltd (TSE:6155) year end revenue is expected to fall 38.7 % to ¥ 13.4 B (2020 ¥ 21.9 B). Year end EPS is expected to fall to ¥ -12.7, (2020 ¥ 130.8).

Installux SA (PAR:STAL) H1 revenue fell 26.6 % to € 52.5 M (2020 € 71.5 M). H1 EPS fell 73.7 % to € 4.4, (2020 € 16.6). Their year ends in December.

In H1 2020, installux experienced shutdowns in their Spain and France locations and therefore revenues fell significantly. They were still profitable though. However, the company provided no guidance for H2 2020, so we don't know what happened in the last 7 months.

Installux is conservative, well-run, and highly profitable. They expand opportunistically and thus do not overpay for acquisitions. Their expansion has mainly focused on control of the supply chain. Their niche aluminum product offering remains unchanged. Still their sales figures are respectable. It has consistently risen by about 3.5% per year for the last dozen years. And of course they have no debt!

The company currently trades at 13 times 2019 earnings, the last full year of data before COVID. While this PE is not super cheap. The company looks much better when using the EV to EBIT ratio because it has no debt and ample cash. The company's EV is 7.2 times 2019 EBIT.

The coming challenges for the company is how to put its cash to use. The following figure shows the cash and equity buildup through the years. Note that in 2018, cash dipped and PPE rose by the same amount because of the acquisition of a factory in Spain.

The simplest way to get rid of cash is to pay generous dividends but management indicated it prefers not do do so to show solidarity with stagnant employee wages. I suppose this can partially explain why the company recently began share buybacks. So far the company has bought back 2% of the shares. 

Right now, I am really not sure whether I should hold Installux for the longer term, or reduce my position. At € 390, it is probably fairly valued. So, I'll just wait and see. Their annual report should out by April, then I'll decide.

Adding More Japanese Value Stocks

In the last entry I described my view that the way to win in this market is to arbitrage across time and markets.

I've described here that right now the US largecap market is the most overpriced ever. But many overseas markets are reasonable. I am quite heavily invested in Japan and South Africa. I feel quite strongly the coming decade is going to be all about emerging markets and value stocks.

Japan is a value country. It is a very developed country that has been heavily discounted for a generation. But, whereas in previous times Japanese companies mainly disregarded the minority shareholders, now they are much more generous. One can find dozens and dozens of companies that pay more than 3% dividends, and are growing dividends around 10%.

Yes, the persistent explanation for stocks being so cheap is the aging population and their ballooning debt. But look at the US. Their debt is getting up there, and the dollar is stronger than ever. And the same goes for the euro.

In March this year, the US market fell 35% off the peak. And I took the opportunity to add to my Japanese holdings. The table here shows the four stocks I currently own. The latter two I have had for 7 years. Both are up more than 3x when factoring in dividends.

	San	Takamatsu	Tachibana	Riken
Price	¥ 1234	¥617	¥ 1760	¥2402
Marketcap (M)	¥ 13820.80 ($ 127.38)	¥ 6663.60 ($ 61.42)	¥ 45760.00 ($ 421.75)	¥ 56687.20 ($ 522.46)
ROE %	6.8	9	6.3	8.7
PE	7.45	4.71	10.42	13.78
PTBV	0.51	0.42	0.66	1.27
Div Yield %	2.59	4.05	2.73	1.67
P/NCAV	‐	0.6	0.71	‐

I also added two new stocks. My main criteria are

• little or no debt
• high dividend yield
• growing dividends
• low PE

The first, is San Holdings (TSE:9628) a smallcap funeral home operator. One might think I bought it because of the recent coronavirus death toll. But not so. The funeral business is hardly a growing business. Coronavirus or no coronavirus, the death toll hardly changes from year to year meaningfully. There is one negative that concerns me. Management said that attendance is lower at funerals because of the dwindling population and cultural trends, This may result in less spending on funerals. I will be paying attention to the number of funerals and the total revenues in the future. But right now San Holdings is the kind of stock that I am looking for: stability during the market turmoil. Yet San Holdings is down 25% off the peak! That 25% is my margin of safey.

The other stock is Takamatsu (TSE:6155) , which is a small niche manufacturer of sophisticated lathes. Now I know very little about lathes in the same way I know little about funeral homes. But their products look very complicated and expensive, as seen below. And they must be very expensive. If there is anything we learned from the current crisis, it is that the coming decades we need to rely more on automation. We need automation to serve the sick and to reduce overcrowding in factories. When you have this kind of a backdrop and the company sells for less than 5x earnings and pays 4% dividends. That's all I need to know to decide to buy.

A reader may think my analysis is very simplistic. But I make no apologies! My analysis will never mention fancy terms like enterprise value (EV), bullshit earnings (EBITDA) or sharpe ratio. My investment theme is based on simplicity, as explained best by this video. I highly recommend watching it.

That's it for Japanese stocks. In my next post I will go into some other new stocks that I acquired during the recent crash. Right now is an exciting time to invest, and I've been busy!

People, Let's get a Grip!

Happy Sunday everyone. I just had to get that out of the way!

The hysteria around where I am, is almost laughable. People are hoarding toilet paper like it will give them immunity to Coronavirus! So, get a grip!

So, I am thinking that if people hoard toilet paper as a gut reaction to a virus, then certainly everyday retail investors are capable of selling way beyond what the current situation calls for.

Unfortunately for me, I own a lot of lower-tier stocks, stocks that are in emerging markets and the cheaper stocks in developed markets. So my stocks have actually dropped farther than the market as a whole.

Below are four of my holdings. Notice that they all yield dividends way above average. All four of these companies have improved earnings. All four of these companies have increasing earnings. Tachibana Electech (8159:TSE) is in fact is a netnet. This means that it is worth more dead than alive! While I do realize that the coronavirus crisis will materially impact Tachibana Electech — the company issued a profit warning for the current quarter — nothing that happens this year should take 35% off the valuation!

	Lewis	Tachibana	Riken	EUPIC
Price	R 23.81	¥ 1248.00	¥ 1770.00	€ 3.38
Shares (M)	80.3	26	23.6	27.5
Earnings TTM	398.1	4422	3857	10.9
Marketcap (M)	R 1911.94 ($ 117.30)	¥ 32448.00 ($ 306.11)	¥ 41772.00 ($ 394.08)	€ 92.95 ($ 103.17)
ROE	8.3	6.3	8.3	8.3
PE	4.8	7.3	10.8	8.5
PTBV	0.43	0.46	0.96	0.79
Div Yield	10.46	3.85	2.2	3.85
Price / NCAV	-	0.73	1.36	-

I am posting this table to share and also to remind myself that we shouldn't pay attention to the markets because the fundamentals reflect the value of shares, not the market whims.

While we always suspect the market is due to get a shock that will cause a drop, where the shock comes from is near impossible to guess with any certainty. I never thought that when the 10 year run ends, the shock would come not from geopolitical or world economic events, but from a germ!

In 2009 when the world was suffering a financial meltdown, I read up on the great depression, and tried to draw parallels. I found there weren't that many similarities.

	Fatalities	% of World
1918 Flu	50 M	3
1958 Asian Flu	2 M	0.06
1962 Hong Kong Flu	50 M	0.03
2020 Coronavirus	10,000 so far	0.0001

Now in 2020, the world seemingly is going through a cataclysmic pandemic, I think it pays to read up on similar pandemics of recent history. The table here shows the most deadly flu outbreaks during the last 150 years when we've had sophisticated financial markets. In that time, I can safely say that these worldwide health crises have not had a negative impact on world economic growth. World War I and the 1918-1919 influenza pandemic did not prevent the roaring twenties. The two pandemics in the 50's and 60's did not affect Warren Buffett's generation in the least bit.

Sure, the world economic output could be reduced significantly because of the Coronavirus, but probably only for two quarters. China, the vanguard in this crises, is already starting to stabilize its new infection rates. I wouldn't be surprised if things go back to 3-6 months there. And my feeling is the lessons learned when this crises is over will spur new economic activity in the health care and infrastructure sector to prepare for the next one. Also, lost production can be recovered when the world consumer market returns back to normal.

But many in the world will not try to rationalize the situation and instead make a sport of hoarding toilet paper and other necessities. It is in our human nature to do something active when danger is lurking and is out of our control. And really there is no harm in doing so. However, the same mentality cannot apply to retail investing, because the market will be rational in the end.

Today, the S&P 500 is down 25% from the peak because of a germ. I think this is definitely the time to be contrarian like Baron Rothschild, who famously said: "Buy when there's blood in the streets, even if the blood is your own.".

Portfolio Update

This blog is so devoid of recent entries that I felt compelled recently to post something, anything. Fortunately I have a lot of odds and ends I can update on my portfolio and the market in general.

After riding high under Trump for a year, I am convinced the US market cannot go any higher. The Shiller PE ratio is at a mind boggling 32.3! That is higher than anytime before the great depression and is only surpassed by the dot-com bubble in 2000. On the other hand, I have holdings that are still reasonably valued overseas and even some in the US. Plus I hate paying capital gains taxes. So, instead of selling a lot I settled on hedging the US market. After all, this is a perfect time to short the US market if I am convinced it cannot go any higher.

I hedged the US market by shorting the S&P500 mini futures. Each of these futures is a contract to buy or sell a contract that will pay out $50 times the S&P 500 index on the delivery date. So suppose on the contract expiry the S&P500 is 2700. Then the contract would conceptually pay out $135,000. In reality the contract settles financially everyday, so the original purchase amount and the settlement payout do not happen but instead the delta in the value of the contract is debited or credited at the close of each trading day. So far I am turning a profit shorting the mini futures. However, I really prefer that were not the case, as each gain means an overall downward bias in my portfolio. But it only confirms my belief that the market cannot go any higher.

 A Prussian general once said that "No battle plan survives first contact with the enemy". I feel that way looking back at my first merger arbitrage situation , between Anthem and Cigna. As it turned out, all the forecasts about its chances of success were too optimistic. The merger fell apart after various state governments voiced objections and sued to block it. Despite this, I fell into the golden period for managed care organizations and both companies rose handsomely. I have since sold my Cigna shares. So the moral of this story is that with careful thought and due diligence, even if I am wrong in my predictions, I can still come out ahead. The S&P 500 hedge is another play from this same playbook.

In addition to the hedge I have also reduced my exposure to US companies whenever he opportunity arose. This was the case with IEHC and Senvest.

While the S&P 500 and my US holdings have done wonderfully since Trump's presidency. My international holdings are a mixed bag There have been laggards such as Lewis Group of South Africa. And there are some wonderful stocks, such as Installux, European Reliance, Tachibana Eletech and Riken Keiki. I have listed the basic metrics of some of my international holdings below.

	Tachibana	Riken	EUPIC	Installux	Lewis	CMH
Price	¥ 2028.00	¥ 2504.00	€ 3.47	€ 415.00	R 31.20	R 27.50
Marketcap ($Mil)	¥ 51105.60 ($ 461.66)	¥ 58092.80 ($ 524.78)	€ 95.43 ($ 110.79)	€ 125.83 ($ 146.09)	R 2602.08 ($ 190)	R 2057.00 ($ 150.2 )
ROE %	6.4	11.2	13.8	9.7	4.8	35.6
PE	13.1	14.1	6	14.5	9.9	8.3
PTBV	0.84	1.67	0.94	1.39	0.49	2.97
Div Yield %	1.97	1.2	3.46	1.93	6.41	5.85

Note that all these companies, with the exception of CMH of South Africa, all have very little debt. The companies whose stock appreciated significantly did so with a combination of increased profits and multiple expansion. I am still waiting for that to happen in my South African stocks. I have not wavered in my belief that the long term future of world economy is in the emerging markets. But in the meantime while I wait, they are yielding 6%.

Riken Keiki Q2 Update

	7734
Price	¥ 1036.000
Market Cap	¥ 24.04 B ($ 208 M USD)
P/E TTM	9.2 x
Div yield	1.7 %
P/BV	0.77
ROE	8.4 %
ROIC	12.2 %
Gross Margin	47.4 %

Riken Keiki recorded yet another outstanding quarter. That is a string of improving results over that last few years. The first half sales increased 7% but income increased 32%. And what strikes me about the recent company performance is the steadily improving margins. So far this half the gross margin is 47.4%. And from 2009 to 2014 the margins were 40.3%, 42.9%, 40.0% 42.6% and 46.7%, respectively. Operationally, the company must be doing something right, or it could be favourable effects of the exchange rate, or both. Foreign sales are just 22% of total sales.

For any foreign investor in Japanese stocks, any recent good news is overshadowed by the terrible Q2 GDP numbers. The country slipped into recession as it followed the previous quarter's 7.3% GDP drop with a 1.6% GDP drop. This caused a even further slide in the exchange rate. Today a dollar costs ¥106. However, I am stinking to Japanese investments for now because I don't think there can be sustainable pressure on the Yen. The Japanese current account is still positive this year, meaning that more money flows into Japan than out. In fact, I think I am going to buy some more Riken Keiki shares!

Summer Quarterly Updates

Tachibana Eletech reported Q1 total income increased 18.9% yoy; revenue increased 6.7% yoy. This improvement was partly the result of strong industrial demand in Japan. The results are even more impressive because the market presumed that last quarter's results were good because customers moved forward purchases to avoid the impending consumption tax increase. Q1 results were the first that included the consumption tax increase, and the results would have been impressive even if there was no tax increase!

The company also upped its year end EPS guidance from ¥161.41 to ¥170. The stock has rallied recently but it is still selling for only 8 times EPS guidance.

Riken Keiki reported earnings increased 19% yoy. Revenue increased 6.6% yoy. This company is firing on all cylinders. Last year its earnings increased 14% and the year before it increased 22%. This is my best performing Japanese holding, increasing by 90% in the 18 months that I've held it. When I initially bought the stock 18 months ago, the fact that it was a netnet was my margin of safety. Now it has risen 90% and is no longer a netnet. The market has priced it more as a earnings growth engine. But the stock still trades below book and and at 11x EPS guidance. This is Ben Graham's value investing at work: buy a good cheap stock, and usually something good happens!

Fujimak reported a ¥ (38.39) loss per share versus ¥ 3.5 a year ago. Revenue decreased 5% yoy. This was a surprise...no... a shock! The company said much of this was the result of a natural pullback from its knockout Q4, when it earned ¥ 99 a share, and to a lesser extent the consumption tax increase.

The company gave an EPS guidance of ¥98, which I hope is true but I also fear may not be met. The company trades at 8x EPS guidance.

Now on to US stocks. Seaboard Corp had one of its best quarters in history. Because of record pork prices, EPS was $79 versus $33 a year ago. H1 EPS was $119 versus $81 a year ago. The stock didn't budge after the earnings reports. In fact it dropped a bit because of plunging pork futures. Pork meat was regularly around $0.80/lb for the last several years, then it suddenly jumped to a high of $1.30. Today, futures for delivery in the next several months is back at $0.90s. Next year delivery dropped but now is back in the 90s also! So the weak stock performance is understandable.

Kansas City Life Insurance reported Q2 earnings slight down. Q2 EPS was $0.77 versus $0.98 a year earlier and premium revenue was down 5%. Book value has grown steadily and now the stock trades at 2/3 book. It also pays a 2% dividend. I feel this is one undervalued and neglected company.

Investors Title Insurance Company reported earnings were down 20% yoy. Premium revenue was flat yoy, which is encouraging considering the exceptional refinancing activity last year. The decrease in earnings was primarily the result of increased commissions. The company now trades at 1.1x book.

Putprop pre-announced that the company's earnings will be approximately ZAR$1.50 vs ZAR$0.86 a year ago! That is a 75% increase and even after the stock jumped by 30% from my initial purchase, it is still trading at 6 times earnings!

IEHC reported Q1 EPS $0.17 versus $0.23 a year ago. Sales was down 4% yoy. I would've liked to see better yoy results, but last year's Q1 was exceptional. I don't really know what to make of this tiny company. I had hoped based on my reading that this company's sales would take off in the last several quarters. But this hasn't happened. The company's sales are quite erratic. I'll pay close attention to this one in the coming quarters.

Riken Keiki Reports Great Q3 Earnings, Fujimak Not So Good

Riken Keiki
Price	¥ 874
Market Cap	¥ 20.29 B ($ 198 M USD)
P/E TTM	8.2 x
Div yield	1.9 %
P/BV	0.70
Price/Netnet	1.02
ROE	8.6 %

Riken Keiki (TSE:7734) reported earnings improved 40% for the first 9 months this year versus last year. The company makes gas detectors and related equipment for industrial use. Sales were up and cost of goods were down. This shows good management of operations.

The company's year-end earnings projection of ¥ 76 / shr did not change, but I think that is a bit conservative. Book value increased 5% over the last 9 months.

Fujimak (TSE:5965) reported disappointing earnings that caused the stock to drop 10%. Fujimak makes commercial grade kitchen equipment. The company reported earnings that came 30% lower than this point last year. I believe the report indicated that the fast food segment was a major contributor to the poor results. Overall, sales were up 10%. But high raw material costs offset the sales gains. Also, SG&A costs were significantly higher than last year. The comprehensive earnings was better at 10% lower. Like many other Japanese companies, Fujimak benefited from gains in its investment holdings in yen.

Fujimak
Price	¥ 800 B
Market Cap	¥ 5.24 B ($ 51 M USD)
P/E TTM	5.1 x
Div yield	2.0 %
P/BV	0.58
ROE	11.55 %

The company did not change its current year earnings projection of ¥ 130 which would give the company a 6.3x earnings multiple for the year. For now I am not panicking.

My Japanese Holdings in H1

In February this year, I documented my initial purchases of two Japanese small caps here and here. The initial reason was 1. the Japanese market is oversold, 2. the economy was due for a rebound. I think a lot of investors under-estimate how often the market will revert to the mean. I think Japan will rebound, maybe not to its 1989 glory, but it will get its day soon. And even if I am wrong, I have a big margin of safety with my two particular stocks.

At the time, I did not really know Abenomics, but Shinzo Abe the Japanese prime minister has had a great effect on the economy. The market has been up about 66% during his tenure — in local currency. However it is still a lot even in US currency terms. But whether Abenomics will help Japan in the long term is still unknown.

Abenomics has directly pushed the Japanese Yen from 80 yen per USD to 100 per USD. This dramatic change has made many big Japanese exporting companies profitable, such as Hitachi and Toyota. I have read, however, that the lower yen has not resulted in more export volumes. This is somewhat worrisome, as greater volume is what will drive growth for the longer term. Furthermore, many Japanese companies are repatriating money and assets from overseas because of the increased value of foreign currencies. This can dramatically effect profitability but only temporarily.

If I had time I would analyze the financial reports of major Japanese exporting companies to carefully analyze the recent effect of the lower yen. But I don't, so instead I just analysed the results my Japanese holdings in the first half year.

Firstly, Tachibana Eletech reported increased earnings for both quarters. Tachibana is a factory automation company that exports about 20% of sales, based on my estimates. The following shows their results for the first half fiscal year. The results were much better in the second quarter compared to the first. This may be a delayed reaction to Abenomics. Operationally the company is doing better although management is still concerned about the slowdown in China and rest of Asia. But a big chunk of the delta was non-core earnings. I grouped them as non-operational earnings and extraordinary earnings.

Secondly, Riken Keiki reported similar results for the two quarters; with the second quarter better than the first. Riken Keiki must export a large percentage of their products. I even see their products on ebay.

So operationally, both are better and the same period last year but Tachibana's results were greatly affected by non-core income. The operational aspect could be both directly the result of Abenomics or indirectly, such as a more positive economic outlook.

These two companies are up around 35% since I first wrote about them, in local currency terms. But I think they are still way undervalued, if one simply looks at the books. However, I do understand that they are at their current price mostly because of the Japanese economic climate. My biggest concern is the huge Japanese debt. This debt is owned by the Japanese people and Japanese companies. I am still figuring out how this will all play out. If the Japanese cannot service the debt, then Japanese will default to themselves, or the Japanese can depreciate their currency so that they can afford to service it. In the latter, more realistic case, the resulting inflation will cause their goods to be more competitive in the world. The key difference between Japan and other countries with high debt is that the world wants Japanese goods! This, in my opinion, will allow for stable calm devaluation of the Japanese Yen, if it does happen.

The conclusion is, I am still very much long my Japanese holdings. In fact, I even bought a new Japanese microcap: Fujimak (TSE:5965). I hope to post a about it soon.

Riken Keiki Reports 2012 Earnings Up 22%

Riken Keiki (7734:TSE) recently announced 2012 earnings which rose 22% yoy, while revenue dropped slightly yoy, as the following chart shows.

Anyone dealing with Japanese stocks must bear in mine that the Japanese yen dropped dramatically in the last year. A US dollar was worth 80 yen initially and now it is worth 102 yen.

The drop in revenue could be partly attributed to the 2011 Japanese tsunami, which increased demand for Riken Keiki's products in 2011. The different directions between the revenue and earnings was due to a $1 bil decrease in cost of goods sold in 2012, and, to a less extent, greater one-time charges in 2011. The company management appears to be good at reducing costs to improve profits.

The company, unfortunately, forecasts lower profit in 2013. Which is surprising considering the recent drop in the yen. The company also proposes a 17 yen dividend, which is a 2.5% yield.

Riken Keiki is a small cap company that makes gas detectors. Other than their financial reports, which are in Japanese, there is almost no news on the company. I own this stock because I believe the company holds a valuable niche in industry. What it does must be hard to duplicate well. As well, it trades near net-net. And, being a Japanese company market cap at about $150 mil USD, the company is below the radar of the big money managers. So, I have a lot of margin for my lack of information.

On a final note, starting with this blog entry, I will reveal my estimated intrinsic value of my stocks if it exists.

My intrinsic value for Riken Keiki is 930 yen. It is 777 yen today.

Why I Own Riken Keiki

I feel investing is a learning and evolutionary process. When I started this blog I thought of myself as a conservative value investor. In the last six months I have evolved into a more aggressive and independent investor. I am now willing to go into less covered areas of the market, in particular small caps. In the meantime I have found a small subculture within the blogging community that covers these cases. On my blogroll on the left you'll see a list of such blogs.

My first smallcap purchases were McRae Industries and Globus Maritime six months ago. Over that period, they have been a mixed bag (+10% and -30%). However, six months is too short a time to tell anything.

The next stock that I found is Riken Keiki (7734:TSE). Riken Keiki makes devices that detect hazardous gases. Its products are mostly for industrial purposes. The company has a long history going back more than 80 years. The company has a market cap of about $130M USD. The company is consistently profitable. Its current PE is less than 10 and it pays a 3% dividend. Riken Keiki is also a net-net company, meaning its current assets exceed its total liabilities.

So the reader may wonder what is the catch? I certainly want to know, if there is one. But I cannot find any so far. In fact, I found the entire Japanese market is full of such profitable net-net small caps that trade at very low PE multiples. I have been following many outstanding investors of today to see what they are doing. For this I really recommend Wealthtrack. Wealthrack is a gem of a financial news show that you can get on youtube. A common theme of several Wealthtrack guests -- what the host Conseulo Mack calls Thought Leaders -- is that Japan is an undervalued market. I agree.

But I admit, I don't know too much about what this company makes. I cannot even access their reports in English. And I don't read Japanese. Based on advice given here, I used translate.google.com to decipher their quarterly reports, which is a far from ideal solution.

My strategy on Japan is to make my own basket of Japanese small caps, starting with Riken Keiki. I am not really trying to stock pick but to take advantage of a inefficiency of the world markets. I believe this opportunity comes because too many people have been burned from twenty years of recession. I know that people have said Japan is a good investment for much of the last twenty years, and have been proven wrong. But from my judgement, I feel this is the time to invest in Japan.

I feel judgement is a huge factor in investing. Judgement is not quantifiable, but someone like Buffett has it in spades. My feeling in part comes from Benjamin Graham. Back in the 1930s, in the heart of the great depression, he wrote articles that listed many companies that are selling for less than their net-net value. And I thought, wow, if only I can get in on such opportunities now. But surely today, in our more efficient markets, such opportunities are impossible, or are they? The investing world today is more liquid than ever and it is very volatile. Two recessions in a decade proves the latter point. I thought about it and reasoned that in such a big investing world, surely some market somewhere is undervalued at any given time. So it just may be possible that the situation Benjamin Graham describes happens very often, maybe now, maybe Japan!

As I mentioned in a previous post when I first thought of being aggressive with small caps. Buffett's thoughts greatly influenced me to this path. He often talks about the great deals he found in the 1973 recession. He compared the depressed Korean market from about ten years ago to that time, like 1973 is the gold standard for an undervalued market. I can just imagine him saying Japan is like that today. The recent decline in the yen helps also. I believe that opportunities, like bubbles, crop up more often than we think. It is just hard to recognize an opportunity at the time.