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Steven Towns
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In January 2015, Steven launched the Uguisu Value letter. Published quarterly, each issue features one thoroughly researched Japanese smaller-cap equity write-up that has baseline 2x upside. With returns of 30%-plus (40%+ yen-denominated) in 2013 and 2014, Steven remains focused on smaller caps... More
My company:
Uguisu Research, LLC
My blog:
Active Investing
My book:
Investing in Japan
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  • Uguisu Value Newsletter Update Q3/Q4

    Many friends, family members and colleagues agree that 2015 has been flying by and somehow mid October is already just around the corner. For the Uguisu Value newsletter, that means the fourth and final issue of the year will be published soon (current target publish date of month's end). I launched Uguisu Value in January as a means of offering one deep conviction, heavy portfolio concentration write-up for value investors based around the world seeking smaller-cap Japan equity ideas that feature asymmetric reward v. risk: upside of at least 2x and minimal downside due to solid margins of safety and historical/current profitability.

    It has been somewhat of a roller coaster ride with interim upside of 30%+ for two of my best ideas. Presently (10/7), however, share prices of all three are down since publishing: by 5% or less in two cases and nearly 20% in another. Having thoroughly researched these companies, it is now, essentially, a matter of time arbitrage. Founding subscribers as well as subscribers from Q2 and Q3 have been excellent, demonstrating the indispensable value investor virtue of patience and in some cases as I'm aware, taking advantage of Mr. Market.

    I am fully invested in my best ideas and in some cases have sizable allocations. My Japan portfolio typically has less than six positions. If I were managing external permanent (or patient) capital or a private equity investment fund, all three best ideas to-date are ideal acquisition candidates of which I would love to own much larger stakes or outright.

    • For my maiden issue (request a sample via email: contact [@], I maintain my valuation upside of a baseline 200% correspondingly with a solid margin of safety. This company is the epitome of deep value (rich balance sheet assets) opportunities in Japan. Having written-up two higher-ROE companies subsequently, I look forward to sharing another company whose balance sheet assets alone make it investment worthy, not to mention also being attractive with regards to profitability.
    • My Q2 best idea was among those with 30%+ interim gains, but the company's stock price has undergone a sharp reversal that is excessive considering the company's earning power (and history of profitability) and strong balance sheet. I maintain my original 100% upside target, but full value realization may naturally take longer due to the lower valuation from which it must increase. I will be watching the company's execution in its core business segments and management's capital allocation decisions (i.e. will there be further share repurchases?) in the coming months and next year.
    • My Q3 best idea is a micro-cap that has made significant investments and is poised for top and bottom-line growth that I expect will drive its valuation higher conservatively by 2x. Execution risk is low (e.g. new warehouse construction is complete; deliberately accumulated inventory is quickly ramping up for sale), while monthly sequential and year-over-year revenues have all been increasing. This is another case of time arbitrage. The valuation is extremely attractive and although it could temporarily decrease somewhat due to exogenous factors such as any China news of late and selling induced by broader market selling, the reward v. risk profile leans (heavily) asymmetrically in favor of the former.

    I hope this update is helpful both to those who have been considering subscribing and newcomers to my website that learn of Uguisu Value. Given the ongoing availability of excellent valuations in Japan, I fully expect to continue featuring Japanese smaller-cap equity best ideas into 2016. One of my investing circles-of-competence is this very segment of smaller-cap and domestic/consumer-oriented Japanese companies that have a combination of attractive valuations with growth opportunities or other value-unlocking catalysts. Japan clearly lacks the equity culture found in the U.S., however, as much as efficient markets are found to be inefficient in New York (let alone Japan), the candlestick charting momentum proclivities not uncommon in Japan are also to the advantage of value investors. Furthermore, the seemingly innumerable self-proclaimed macro pundits and Japan experts continue to misunderstand Japan and again that is ultimately to value investors' benefit.

    Links for Uguisu Value additional information and subscription purchase: and

    Email for Uguisu Value maiden issue sample:

    *This article first appeared at

    Oct 08 1:22 PM | Link | Comment!
  • The Day Before GE's Shareowner Meeting

    General Electric's (NYSE:GE) annual shareowner meeting is tomorrow (Weds.) in Detroit. I urge those that haven't voted to do so as soon as possible today to ensure votes are counted. To help make readers better informed and to generate discussion, I prepared two write-ups surrounding GE's annual meeting: (1) a review of each item for vote on its proxy, and (2) a look at why GE is undervalued. It's unmistakable to me the market has been efficient in valuing GE shares when considering GE's deficient corporate governance and management. Please continue reading even if you have read the above two linked articles.

    However, shareowners have limited recourse since a majority of shares are owned by institutional investors that often either vote in-line with management or simply aren't putting clients' interests first when voting proxies. Another matter is the inadequate shareowner proposal system, which limits shareowners' rights, is non-binding, and has been hijacked by corporate and private lawyers. Finally, there is almost no accountability of directors (shareowners pay costly indemnity insurance for their own directors) and at GE, to make matters worse, executives do not appear to be held accountable by the board (instead they have been compensated very well throughout while shareowners continue to exercise great patience that is showing signs of wearing thin).

    With that being said, a start is to vote the proxy items. Low vote turnout by individuals fuels companies', lobbyists', and academics' arguments that certain proxy reform measures aren't needed simply because shareowners would essentially not be reading them anyway or would not care. One such critical matter is the disclosure of CEO pay to median worker pay. I will share thoughts on next steps following the vote results.

    Disclosure: I am long GE.

    Apr 24 8:11 AM | Link | 4 Comments
  • Critical dividend proposal for GE approved by SEC
    Seeking Alpha readers, sharing with you great news I received last Friday regarding a dividend proposal I submitted to General Electric (NYSE:GE) for its 2012 annual meeting and proxy. The SEC's ruling that GE may not omit my proposal is significant for both GE shareholders and all public equity shareholders. Please visit my site for a full review of the proposal, GE's reaction thus far, and the SEC's opinion, especially regarding the importance of dividends to shareholders.

    Link to article:

    Jan 19 8:42 AM | Link | Comment!
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