Japanese stocks are the last great deep value trade on earth. Rock solid balance sheets. Monster cash flows. Dirt cheap prices. I find them and buy them
Dumpster
Joined March 2026
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Japanese stocks are the last great deep value trade on earth. Rock solid balance sheets. Monster cash flows. Dirt cheap prices. I find them, trade them, and do it all over again. Follow for the best deep value plays in Japan nobody else is talking about.
In 2007 an American fund called Steel Partners tried to buy Bull-Dog Sauce, a Tokyo condiment maker.
Steel owned 10.25%. It bid ¥1,584 a share, then ¥1,700.
Bull-Dog responded with a poison pill. 83.4% of shareholders voted for it.
Japan's Supreme Court upheld it that August.
Steel got paid cash for its warrants and went away.
That was the old Japan. Today foreign funds are the largest shareholders in famous Japanese companies, and boards answer the phone.
My daughter asked why I wake up at 2am.
I said the Tokyo stock market is open.
She asked what I'm waiting for.
I said a 78-year-old man in Nagoya to decide to pay a dividend.
She asked how long I've been waiting.
I said three years.
She asked if he knows I'm waiting.
He does not.
Kongo Gumi was founded in the year 578 to build a Buddhist temple in Osaka.
It survived 40 generations of the same family, the samurai era, World War II and the 1989 crash.
What finally took it down was ¥4 billion of debt from the real estate bubble. In 2006 a bigger builder absorbed it.
1,428 years. Taken out by a balance sheet.
Net cash matters.
Americans this week:
Debating whether Alphabet's $51.4 billion quarter of capex will pay off.
Me this week:
Reading the yuho of a 40-employee Japanese parts maker that spent ¥80 million on a new press machine and paid for it in cash.
We are not the same.
For every ¥100 you pay for this Japanese manufacturer, ¥41 is net cash sitting in the bank.
Market cap: ¥3.83 billion.
Cash: ¥2.04 billion.
Short-term debt: ¥0.46 billion.
Net cash: about ¥1.58 billion.
It trades at 0.51x book.
So you pay about ¥2.25 billion for the factory, the machines, the customers and decades of know-how.
Meanwhile Alphabet just spent $51.4 billion on capex in one quarter and the stock fell 10%.
3 cheap Japanese stocks I'm looking at this week:
- Small manufacturer. 0.51x book. Net cash = 41% of market cap.
- Electronic components maker. 0.90x book. ¥1.69 billion net cash.
- Auto accessories wholesaler. Just got an unsolicited bid at a 106% premium.
Tickers tomorrow.
Date: "So what do you do for fun?"
The official answer: "I like to travel."
The truth: I flew to Gifu to attend the shareholder meeting of a 40-employee fastener maker that trades below net cash, asked one question about the dividend, and got a tote bag.
There was no second date. There was a 4% dividend.
You're telling me I can buy a Japanese manufacturer at 0.51x book, AND 41% of the market cap is net cash, AND activists are circling the whole sector, AND another small cap just got bid at double its share price.
And you're over here waiting for the Anthropic IPO at 55x sales.
Unfathomable behavior.
Japanese stocks are the last great deep value trade on earth.
This week a company offered ¥3,000 a share for a small car accessories wholesaler. The stock closed at ¥1,458 the day before. That's a 106% premium, and the board didn't even ask for it.
Rock solid balance sheets. Trades below book. Activist campaigns at 265 companies since February.
I find them, trade them, and do it all over again. Follow for the best deep value plays in Japan nobody else is talking about.
Hotel front desk in Gifu: "Business or pleasure?"
Me: "Pleasure."
The truth: I flew 13 hours to ask a 79-year-old chairman one question about ¥6 billion of idle cash at an annual meeting that will last 22 minutes, in a room with 9 other shareholders, 7 of whom are retired employees, 2 of whom are asleep.
He will bow and say "we will consider it carefully."
I will buy more on the way to the airport.
Benjamin Graham spent his life looking for companies trading below their net cash.
In America they mostly disappeared by the 1970s.
In Japan there's still a whole exchange of them, filed in a language most American investors won't read, with annual meetings held at 10am on a Thursday in June.
If Graham were alive today, he'd be learning Japanese.
Name one Japanese company where net cash is bigger than the market cap.
Ticker and the business in one line. I'll go through the best ones this week.
One tracker now counts 241 Japanese companies targeted by activist shareholders.
Twenty years ago an activist in Japan was a foreigner nobody would meet with.
Now the companies have IR departments, English decks, and a buyback ready the week before the AGM. Progress looks like paperwork.
I asked the chairman why the company holds ¥40 billion in cash.
He said "for times of uncertainty."
I said the Nikkei is at 63,000.
He said "exactly. Very uncertain."
US fuel oil prices are up 74% from a year ago.
Japan imports nearly all of its energy.
People ask why Japanese small caps still look cheap after the reform rally. Part of it is that the market prices them for an oil shock every year, whether one shows up or not.
Banks and insurers were bid in Tokyo this morning on rising rates.
For 30 years Japanese banks were among the worst businesses in the developed world. Zero rates, a flat curve, nothing to earn.
The BOJ is at 1.25% now, the highest since 1995. The most hated sector in Japan finally has a spread.
Japanese deep value is the only strategy where the best catalyst in a decade was a letter from the stock exchange.
Not an activist. Not an acquirer. A polite letter asking companies to please consider not trading below book.
And it worked. Slowly. Like everything in Japan.
Tokyo Deep Value retweeted
Tax-loss selling is starting early this year. Earlier than I've seen in years.
Millions of investors are dumping stocks right now for one reason: taxes.
Not earnings. Not guidance. Not fundamentals.
That forced selling is pushing good companies below what they're actually worth.
Here's the mistake almost everyone makes when hunting for these bargains:
They screen for the biggest losers of the year.
Wrong number.
Someone who bought in 2019 might still be sitting on a gain. They have nothing to harvest. They're not selling.
The number that matters is how far a stock trades below this year's average purchase price, its year-to-date VWAP.
That tells you how many holders are underwater right now, and how much selling pressure is still coming.
Big gap below YTD VWAP = lots of trapped holders = more forced selling = bigger dislocation.
I built a screener to find exactly these setups.
Over the next few weeks I'll be sharing the best ideas it surfaces.
Follow along.
taxlossseason.com
The Nikkei peaked in December 1989.
It didn't get back to that level until February 2024.
34 years. An entire generation of investors was told "stocks always go up in the long run."
Japan was the footnote.
wife came up to me exhausted
"Can you take out the trash?"
I pulled out my Bloomberg terminal
Trading below book value.
No buyback announced.
Still holding cross-shareholdings with her sister's family.
"Until you present a credible plan to improve capital efficiency and raise ROE above 8%, I won't be allocating any resources to this."
She said that's not how marriage works
I reminded her the Tokyo Stock Exchange asked every company to fix this in 2023 and she has still not filed a disclosure
I went right back to my 4am Nikkei session and buying more trading houses because Warren Buffett would never take out the trash during market hou