market folly

We're posting up notes from Invest For Kids Chicago 2014.  Next up is Steve Kuhn of Pine River Capital who talked about Japan.


Steve Kuhn's Invest For Kids Chicago Presentation

•    Talk about Japan.
•    Heard a comment – “a land alpha goes to die”.
•    Traded it for 3 yrs on a night desk trading Japanese convertible bonds until 4am at Citadel.
•    #3 economy in the world.
•    Japan is interesting as Japanese stocks are still cheap relative to bonds.
•    Japanese corporate governance: the sun is rising. It is improving and the trend is your friend.
•    “Boring is beautiful”.
•    Pension funds are increasing their equity allocations, especially GPIF, which is material.
•    Long cheap, low volume, higher quality companies with strong track records. Short expensive, high volume, high beta companies with poor track record in return on capital and shareholder friendliness.
•    Their long portfolio trades for 12.2x PE, 8.1x EBITDA, 5% FCF yield, 11% ROE and has returned capital. Short portfolio trades for 23x PE, 11.4x EBITDA and lower returns on capital.
•    Looking to fix corporate governance such as a stewardship code, cross shareholding reduction and adding external directors.
•    GPIF looking to boost share allocation to about ~25%.
•    Japan companies have increased their share repurchases which is up 49% YoY. Dividends also increasing.
•    Cash holdings are still at near record highs – a positive for share repurchases and dividends.
•    62% of companies now have outside directors, up from 32% in FY04. Still in last place when compared to other major economies.
•    Takeover defenses peaked in FY08 and are steadily declining.
•    Easy way just to buy the JPNK index.


Be sure to check out the rest of the hedge fund presentations from Invest For Kids Chicago here.