Hunting for Value
Picking your spots
April 18, 2025
GMO’s 7-year asset class real return forecasts shows a negative return for both large cap and small cap US equities after years of beating the rest of the world. All categories of international investments are predicted to perform better especially Japanese small cap value stocks. This category has been a quintessential value trap for years, but from 2022-2024 the Japanese culture surrounding corporate control has been upended.
Activism has gone from practically impossible to both practical and in many cases unnecessary as boards and managements reform. There are better ways to exploit this but the Japan Smaller Capitalization Fund, Inc (JOF) trades at a ~15% NAV discount and owns a diversified mix of mostly industrials, basic materials, and consumer goods and services.
Before you try to aim precisely at the right stock, pick the right hunting grounds. This year, that appears to be sectors that are less vulnerable to a recession and geographies that are less expensive such as Japanese small cap value stocks.
Consider buying some JOF.
February 26, 2026
The JOF NAV discount tightened from ~15% to ~8% while that NAV is +48% over the past year. The distribution yield is >5% which helps further tighten the discount.