Japan: a new dawn for growth investing

Short Briefings on Long Term Thinking - Baillie Gifford

Is the time ripe for Japanese growth stocks? Donald Farquharson is Baillie Gifford’s head of Japanese equities and knows the market better than most. In the latest episode of Short Briefings on Long Term Thinking he draws on a recent visit to the country to explain why conditions seem favourable for a cohort of domestic companies with long-term mindsets.

Background

There’s a sense of renewed confidence and enthusiasm in the air in Japan. The country is home to the world’s second-largest market for equities after the US, but it doesn’t get a corresponding degree of attention from international investors.

The reason is partly because of the nation’s past weak economic performance. But a recovery is underway, and critically, many of its growth stocks have strong balance sheets, big ambitions and a positive story to tell.

In this episode, Baillie Gifford partner Donald Farquharson draws on his experience of investing in Japan since 1990 to explain why he’s particularly optimistic about the opportunities ahead for a select group of companies. They include the medical equipment maker Olympus, the car components manufacturer DENSO and the takeover advisory service Nihon M&A Center.

He also shares why he thinks some misunderstand Japan and why it’s no coincidence that many of the companies he backs are founder-run.

Resources:

Discovering the unsung superstars of Japanese technology

From Yahoo! to Z Holdings: the evolution of an online pioneer

Japan: the small businesses with big opportunities

Investing in Japan: distance lends perspective

Donald Farquharson’s LinkedIn page

Aiming High: Masayoshi Son, Softbank Group and Disrupting Silicon Valley

Past podcasts

Timecodes:

00.00 Introduction

01:40 Investing in Japan in the 1990s

03:00 ‘Undiscovered’ Japan

03:55 How banks and other businesses changed

05:30 A sustainable recovery?

06:45 An exciting time for growth companies

07:45 Strong balance sheets

08:15 Olympus and endoscopes

09:45 Diversity on the board

11:00 Nihon M&A Center and company takeovers

12:50 DENSO, a major supplier to Toyota and others

14:30 Toyota City, home to one million people

15:35 Competition for car batteries

16:30 Baillie Gifford’s advantage in Japan

17:45 Looking beyond the headlines

18:20 Book recommendation: Masayoshi Son and Aiming High

19:45 Investing in founder-led firms

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Companies mentioned include:

DENSO

Koganei Country Club

Nihon M&S Center

Olympus

Panasonic

ROHM Semiconductor

Softbank

Toyota