Why Japan gets a ‘big fat F’

Added 27th September 2017

Value opportunities in Japan are few and far between for investors according to Harris Associates’ David Herro, manager of the $29bn Oakmark International Fund.

Why Japan gets a ‘big fat F’

Herro, a value investor and CIO at the Natixis-affiliated Harris Associates, said it was difficult to find Japanese companies that were both high quality and good value.

Firms sat on mountains of cash and did not care about securing returns for shareholders, he claimed.

In London to speak about the Natixis Harris Global Concentrated OEIC, Herro said Japan was a “perfect example” of a market where value investments were scarce.

“It is very, very difficult to find high quality, there’s plenty of low prices, but it’s a big fat F for Japan’s value,” he said.

Holding out for Japanese value

Herro said that he struggles to find a company fulfilling his definition of value, namely being good allocators of capital, having a good structure for returns and good reinvestment.

While improvements have been made, he added that change was too slow.

“It’s improving, but not enough. It’s moving slowly, like a turtle,” he said.

Of the 20 holdings in the Natixis Harris Oeic, which just marked its third anniversary, Herro only holds one Japanese stock, Toyota.

“I think it’s a great company, they have improved.

“They are getting better but we need far more of that behaviour [of reinvesting capital and improving returns] it needs to be infectious,” Herro said.

This focus on looking after shareholders is something the government could help with, Herro claimed, saying it should “quit protecting them” from hostile takeovers by international companies in order to force them to compete.

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Louise Hill

Senior Reporter

Louise joined Portfolio Adviser in December 2016 as one of the editorial team’s news reporters based in London. Originally from Liverpool, she is an NCTJ-qualified journalist and began her career in 2014 working on local newspapers.

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