Japanese Secrets
In Japan, shinise (literally “old shops”) are long-established businesses that have been in operation for at least a hundred years – some even more than a thousand years.
These businesses have endured nuclear wars, earthquakes, tsunamis and depressions, and yet, as explained here by Morgan Housel, they keep going on, generation after generation.
Japan is in fact the country with the biggest number of such old businesses, with their products and services clearly enjoying immense prestige (one of these being for example the household brand-name Nintendo).
What is their secret? The reasons for their success are probably many, but there is one that could surprise those used to Western-style capitalism: these Japanese companies hold tons of cash, and no (or very low) debt.
Low leverage certainly helps survival. As illustrated by Housel, with no debt, the number of events a company can withstand might fall within a range that looks like this:
A few catastrophic events might hurt, but you are likely to survive.
With more and more debt, says Housel, the range of events you can survive shrinks until you are toast:
What’s all this got to do with us?
At Niche AM we run a Japanese fund that invests in what we call “orphan companies”, i.e.: companies not covered by the sell-side and thus significantly undervalued. But lack of broker coverage is just one of the features of our fund.
As deep value investors, we can’t but appreciate the business approach of shinise. And consistent with that view, in our portfolio we only hold companies which -like shinise – are net cash positive. In fact, the companies in our Japanese Orphan Companies fund have roughly, on average, 10% more cash than their market cap:
For further details on our Japanese fund see here.
This is a marketing communication intended exclusively for institutional investors.
Refer to Fund Prospectuses & KIDs before making any investment decision.
For any questions email us on: info@nicheam.com
Follow us on LinkedIn: www.linkedin.com/company/niche-am
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