What should Japanese stock investors keep in mind during the sudden rise and fall? DAIBOUCHOU x www9945 Billion Trader Dialogue | Tosil Rakuten Securities investment information media

Expectations and challenges are coming for Japanese stock investors, with the Nikkei Stock Average exceeding 40,000 yen, the highest price in 34 years since the bubble economy, and then swinging back to the 30,000 yen range. This time, we have Mr. DAIBOUCHOU, www9945, an individual investor who has continued investing in Japanese stocks for many years without getting discouraged even during the downturn.

The two of them are leaders of “millionaires” who started investing with little money and experienced various ups and downs. Looking back on the 34 years since the bursting of the bubble, we will ask for your opinions on what individual investors should check, what to prepare for, and how to act.

I learned a lot even though I was at the mercy of the long slump.

Towsil:First, how did the two of you overcome the long period of slump in Japanese stocks?

Mr. DAIBOUCHOU:I started investing in stocks at the height of the IT bubble in 2000. After that, the stock market was affected by the bursting of the IT bubble and the Lehman Shock, and the Nikkei Stock Average remained stagnant for a long time. Looking at the stock chart, the Abenomics market has led to an upward trend, but my impression is that the stock market has finally broken out of a long slump and turned into an uptrend.

Mr. www9945:The worst time for Japanese stocks was during the two-and-a-half years when the IT bubble burst and prices steadily declined…from 2000 to March 2003, when the Nikkei Stock Average fell below 8,000 yen. I felt really hurt during this period. Assets have been cut in half.

The three years between March 2020 during the coronavirus shock and the lifting of the mask ban in March 2023 were tough… My investment method is to watch the streets of Ikebukuro, Tokyo, and reflect the metabolism and awareness of various shops in my stock purchase decisions, but the city was dead for three years due to the coronavirus, so I’m not sure. It was not possible to have and hold it.

Mr. DAIBOUCHOU:Due to the corona shock, the market crashed in a short period of about half a month. It would be a mistake to think of a short-term down market like this as a crash market; the down market continued for about two years after the bursting of the IT bubble and the Lehman Shock.

What I kept in mind was that if you rush to buy more or buy more stocks in the early stages of a market crash, you may be hit by another market crash. If you get discouraged by another crash and sell off, it will be as if you hit the bottom. A crash in the market has the effect of amplifying people’s suffering, and there is an unfathomable fear in it.

Mr. www9945:I agree. Due to the corona shock, the market continued to fall for 25 days. The price drop rate is approximately 30%. It is a deep and fast market where prices drop significantly in a short period of time, and the rebound period is short, only 2 days.

It was so low that there was no escape to cut the losses. When the IT bubble burst and the Lehman shock occurred, there were about 3 to 5 major rebound periods, so we were able to escape, but with the corona shock, it feels like we have been hit for the first time in 10 years.

Mr. DAIBOUCHOU:The difference between the bursting of the IT bubble and the Lehman Shock was that in 1999, the prices of Hikari Tsushin, Softbank, and Yahoo rose significantly and then crashed. In other words, the stocks that crashed were localized. During the Lehman Shock, it felt like all stocks were sold off.

Even stocks that were originally defensive and solid, such as J-REITs (Japanese real estate investment trusts), were caught up in the crash. That difference is also worth noting.

Mr. www9945:During the Lehman Shock, if you bought on credit in the morning, it would immediately drop by 8% or 10% and you would have to sell it the next day. I wanted to make a long-term investment, but ended up investing for 1 night and 2 days. Such outrageous things were happening every day. I think it was unusual.

Japanese stocks skyrocketed, and this is how they behaved

Towsil:The current rising market has had strong momentum since it started rising, and I think it’s rare in the past for stocks to rise this much in a short period of time. Did you predict that the Nikkei Stock Average would soar to over 40,000 yen?

Mr. www9945:I never expected it to rise so rapidly in such a short period of time.

I thought that investment funds would come to Japan due to the new NISA (Small Investment Tax Exemption System) starting in January and the new Cold War between the United States and China, but technically it lasted eight months. If the market price exceeded 33,700 to 33,850 yen, it was a signal to buy, so people who were good at futures trading would buy a lot there.

I don’t do futures, so I was only buying spot or credit, but until late January, I was doing cross-trading of last year’s liquidation – repayment selling and credit buying.

Mr. DAIBOUCHOU:Last year (2023) was a good market, with prices rising 20% ​​to 30%, so I predicted that there would be an adjustment in 2024, and my image was that the price would increase by 7%, or about 36,000 yen, at the end of the year. I never thought that the market would be stronger this year than last year, which was unexpected. However, I thought it would eventually exceed 40,000 yen.

Stock prices are basically going up, which is why the market has been in a slump until now. However, I didn’t expect it to exceed 40,000 yen so quickly this year.

Towsil:How do you analyze the background to this year’s sharp rise in Japanese stocks?

Mr. www9945:I think it will be completely led by foreign investors. Technically, as I mentioned earlier, the conflict is over, and geopolitically, Japan is an ally of the United States, including Western countries. On a micro level, the economic boom seems to be a contributing factor, with Taiwan’s TSMC building a semiconductor factory in Kumamoto, albeit locally.

In the current market led by foreign investors, unless the company has a market capitalization of 500 billion yen or more, and the median market capitalization is 1 trillion yen or more, the price will not rise at all and momentum will not be gained (in order of top price) The situation is such that the tension cannot be increased.

Among current investment methods that invest in all countries (worldwide), Japanese stocks account for about 5-6% of the total. Under such circumstances, the more active investors buy in order to take advantage of the alpha (excess return relative to the market average) of the rapid rise in Japanese stocks, the more the prices will rise. In addition, there are observations that oil money has moved a little.

Mr. DAIBOUCHOU:I see this sudden rise in prices as a result of the resurgence of “Made in Japan.” TSMC’s Kumamoto factory is a typical example, but the Japanese government offers generous subsidies to attract foreign companies. Furthermore, the United States does not trust China, which is its manufacturing base, and is seeking manufacturing capabilities from its ally, Japan, to replace China.

For example, there was a story that an American port facility, wary of information leaks via a Chinese company, changed direction and decided to have Mitsui E&S (an American subsidiary of Mitsui E&S) produce cranes in the United States instead of relying on Chinese-made cranes. For the United States, Japan enjoys the advantage of being a reliable ally, and I think stocks related to manufacturing and production equipment tend to rise.

Towsil:April is a month when big opportunities have arrived after overcoming the slump. Please tell us what stocks you sold and bought during this period and why.

Mr. www9945:The brands I bought are Sanrio (8136) and Daikokuten Bussan (2791). I specialize in BtoC stocks, and Sanrio’s IP (intellectual property) collaborations have flourished in Ikebukuro since the mask ban was lifted last year. I saw that and bought Sanrio.

Hello Kitty’s scope of collaborations has widened, and she has actively collaborated with other companies, such as “Chikawa x Kitty”, been appointed as “TOKYO Welfare Work Ambassador” by the Tokyo Metropolitan Government Welfare Bureau, and collaborated with table salt. We are collaborating with companies.

In 2020, the company was rejuvenated due to a change in its president (the founding president, who was 92 years old, passed on the position of president to his 31-year-old grandson), and I thought it would be a good idea to position it as a one-of-a-kind company, so I bought it.

Daikokuten Bussan operates discount stores and other businesses. Prices of food, daily necessities, fuel, and other items have increased by about 15% compared to last year due to inflation and the weaker yen.

Those who are directly affected by this rise in prices are people in urban areas who do not have inflationary assets such as real estate or stocks. Especially low income groups. That’s why I wait for the half-price sale at the supermarket before buying, but Daikokuten’s products are always cheap. Takoyaki 100 yen, bento 198 yen…

Still, it is not too high, like Kobe Bussan, which operates a business supermarket, with a PER (price/earnings ratio) of 40 times, but around 28 times. Based on this association, I also purchased Trial Holdings (141A), a discount store operator that went public in March.

On the other hand, the stocks I sold were LINE Yahoo (4689) and SMS (2175). The reason I bought LINE Yahoo in the first place was that PayPay was profitable and that consumption among the middle class was expected to increase. I was unsure of what would happen from a corporate perspective, so I cut my losses.

SMS has increased sales and profits for 20 consecutive years, but its P/E ratio is high at around 30 times. Since it is a growth and mid-cap stock, its market capitalization is between 200 billion and 300 billion yen. In the current situation, as I mentioned earlier, value of 500 billion yen or 1 trillion yen is being bought, so mid-cap growth stocks are not being bought.

Considering capital efficiency, I took profits at a low profit and withdrew to switch to other value stocks or large-cap stocks.

Mr. DAIBOUCHOU:The stocks I bought in April were Kasumigaseki Capital (3498), Mitsui E&S (7003), and Mitsui Marine Development (6269). What these stocks have in common is that they are highly volatile, sensitive to the economy, and benefit from inflation. I bought more to improve performance.

The stocks I sold were Technos Japan (3666) and Wellnet (2428), which are solid but stable for better or for worse. Wellnet, which provides payment solutions, felt that growth in the payment-related business was slowing due to intense competition.

I bought Technos Japan in anticipation of demand for updates to SAP’s ERP (integrated core business system), but I sold it because I thought the demand for updates would soon subside.

The company’s business performance improved to a certain extent, and the stock price reached a certain level, so I sold it. The main reason for selling was that when I bought more Kasumigaseki Capital etc. through margin trading, my credit position expanded too much and I had to sell something, so I felt like I had to sell it reluctantly. At the current market price, if you don’t have a limit on cash, you’ll want to buy as much as you can.

Kasumigaseki Capital has a huge real estate pipeline and can expect success fees. The shipbuilding sectors of Mitsui E&S and Mitsui Marine Development are doing very well. Mitsui Marine Development is a company that designs and operates ships called FPSOs (Floating Production Equipment) that drill for crude oil hidden on the ocean floor. Even though we talk about decarbonization, the demand for crude oil is only increasing.

Shaking Japanese stocks, how to use them in your portfolio

Towsil:The new NISA has started, and there are many beginners. In the world, there is a strong impression that investment trusts are an “all-country option,” and people don’t seem to pay attention to individual stocks.However, when including Japanese stocks in a portfolio, how should you use them? Is not it.

Please tell us your opinion about the significance of Japanese stocks and how to utilize them.

Mr. DAIBOUCHOU:Japanese individual stocks account for 99% of my financial assets. That’s how much of an advantage Japanese individual stocks have. The reason for this is that I am Japanese and currently live in Japan, so it is easy to gather information on Japanese companies.

In addition, good stocks are being left undervalued. Japanese stocks are not necessarily bought and sold based on fundamentals, and they also tend to fluctuate based on short-term financial results. That’s why I think there are many opportunities if you invest for the long term with an eye on growth in one or two years.

What’s more, it’s a lot of fun to exchange information and interact with fellow Japanese stocks at Japanese stocks offline meetings. It is a good idea to study Japanese individual stocks and try investing as a tool to make stock buddies.

Investment trusts don’t get a lot of buzz, but individual stocks change their stock prices every day and financial results are announced once every three months, so there’s no shortage of topics to talk about. I also have friends at offline meetings in Osaka, and the information I get from them makes more money than the Shinkansen fare.

Mr. www9945:It’s true that I often see DAIBOUCHOU wherever I go (lol). I think the main reason why beginners invest in investment trusts, especially All Country, is that they don’t understand stocks and the market.

However, as the market price rises, investment fraud increases dramatically, so it is strictly prohibited to get into things you don’t understand. If you are a new NISA entrant, please be cautious.

However, I do not deny All Country, and I think that individual stocks can be used as a supplement to All Country.

The main thing is to accumulate money steadily in investment trusts, buy stocks of drugstores in the area where you live, and hold them for a long time using preferential treatment and dividends to supplement your household finances, or buy McDonald’s Japan Holdings (2702) and buy preferential meal coupons. Or get something like that. I think it’s a good idea to try Japanese stocks as a starting point that you understand and enjoy, and gradually get used to it.

What to do and what not to do during a sudden downturn

Towsil:If there is a sharp rise, we cannot rule out the possibility of a sharp fall. We are currently at a time when stock prices are fluctuating wildly and people are getting anxious, so please give Japanese stock investors some advice on what to prepare for, how to keep in mind, and how to view the market.

Mr. www9945:The market has been on the upswing for about 10 years now, but there will come a time when there will be a downturn. The most important thing to keep in mind is money management. You should follow the rules you have set for yourself, such as “If the price goes up to what yen, sell it.”

The worst thing you can do is hold on to groundless hopes and let things fall without you doing anything. When you reach the stop-loss line you set and it becomes negative, go ahead and throw it. If you can throw even a bad sign, you are at least an intermediate level investor.

When the market weakens, the liquidity of stocks dries up, making it impossible to sell even if you want to. Please sell it once and for all, based on numbers, not emotion.

Mr. DAIBOUCHOU:If you are worried about a crash, you tend to run away to cash, but if the market is rising, you should hold on and make a solid profit. I think it’s a good idea to save those profits and prepare for a crash.

Personally, I am currently in a slightly more aggressive style where I am in a full position (a state in which all my cash is invested in stocks) and increase my open interest through margin trading, but this can only be done in a rising market. I think this is because they are making solid profits.

Speaking from my 24 years of stock trading experience, it is clearly impossible to predict a market crash and escape from it (lol). Build a portfolio that can continue even if your current assets drop by about 30%. I think it’s important to own stocks of companies that you can trust even if the market crashes.

However, unlike a full-time investor like me, salaried investors will still receive a salary even if their assets decrease, so they should be able to make a living even if their stock assets decrease. I don’t think there will be much to be learned if you are too impatient with immediate losses and sell recklessly.

Mr. www9945:When prices are rising sharply, it’s best to stay calm and take a good look at the market. There are stocks that are blind spots and whose stock prices don’t move at all even when others are soaring, so if you have reliable evidence such as corporate performance, it’s a good idea to buy them.

Currently, foreign investors are buying stocks with large market capitalization ahead of others, and large stocks such as semiconductors, shipbuilding, and banks are driving the rise, but from now on, the ripples will spread to small and medium stocks. I think I’ll go. There are still promising stocks that you can pick up now. You’ll make it in time.

Mr. DAIBOUCHOU:I certainly agree that you should buy stocks that are lagging behind or stocks that are rising but are still undervalued. If you look for brands that are completely neglected, you will definitely find them. I think a good way to do this is to look for cheap stocks within the sector where the person’s knowledge and experience are based, such as their workplace or hobbies.

Companies that close their accounts in March will announce their financial results in May, so please keep an eye on that. At the beginning of 2024, there are many companies whose performance is improving, so be sure to look for stocks that have strong earnings forecasts for the fiscal year ending March 2025 and have a cheap PER ratio.

Towsil:In these times of turbulence, if you watch the market calmly without panicking, there is a chance to find reliable and cheap stocks. Thank you for today.