Great writeup! I'm leaning towards beauty, but the kind of beauty only deep value investors can appreciate. Thanks for bringing this to my radar.

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Thanks very interesting. It looks like they will be building a new modern factory in 2025. This looks like it could be a material use of cash.

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Feb 27·edited Feb 27Liked by Otto Oehring

Hi O-Tone,

Hope you have been well. I know you don’t make investment decisions based on macro predictions but being an economist I was hoping to get your thoughts on something I have been pondering (and please correct me if I have something wrong).

I currently hold Zigexn, Nitto Kohki and Yodogawa Steelworks.

Of the three the most obvious undervaluation is Nitto Kohki due to cash on the balance sheet. This is my major concern with my investment. Japans inflation is currently 4.2%. Japans public debt to GDP is 263%. Obviously for a company holding high levels of cash inflation is bad.

From my limited understanding and 1,000ft view of the situation, Japan cannot raise interest rates sufficiently to combat inflation due to their high levels of debt. My thinking is yields will rise forcing Japan to either buy more bonds to suppress yields (weaking the yen and letting inflation run) or inevitably print more money to service the debt devaluing the currency (nowhere near to the same scale but similar to what Weimar Germany was forced to do to service war reparations).

The countries debt is the elephant in the room, I can’t quite get my head around. What is the path out of this for Japan?

Perhaps we have already seen much of the devaluation (at least in the near term) with the rest of the world raising rate and the Yen weakening. After all if major countries enter recession in the next year or two they will likely cut rates again strengthening the Yen, with the Yen also historically being a safe haven during the GFC, March 2020 etc. Increased inflation will also likely force companies to become better capital allocators.

Appreciate any thoughts you may have, but understand macro thoughts and predictions are often unknowable.

All the best,


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Jan 5Liked by Otto Oehring

Interesting write-up, thanks for putting in the work!

I'm wondering though, if that historically high cash balance isn't actually more of a deterrent. I mean, in real terms that cash balance has significant negative returns and according to your write-up there are no plans to put this to work.

One comment mentions a new factory in 2025, but that's still at least 2 years of negative real returns. For a company with zero growth over a 10 year horizon.

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Dec 25, 2022Liked by Otto Oehring

Thanks for the detailed analysis. The past shows that now might be a good time to start accumulating (business cycle-wise)

Frohe Neues im Voraus! :)

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