Japan: a new dawn for growth investing

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Recorded08 Nov 2023

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Is the time ripe for Japanese growth stocks? Donald Farquharson is Baillie Gifford’s head of Japanese equities and knows the market better than most. In the latest episode of Short Briefings on Long Term Thinking he draws on a recent visit to the country to explain why conditions seem favourable for a cohort of domestic companies with long-term mindsets. Background There’s a sense of renewed confidence and enthusiasm in the air in Japan. The country is home to the world’s second-largest market for equities after the US, but it doesn’t get a corresponding degree of attention from international investors. The reason is partly because of the nation’s past weak economic performance. But a recovery is underway, and critically, many of its growth stocks have strong balance sheets, big ambitions and a positive story to tell. In this episode, Baillie Gifford partner Donald Farquharson draws on his experience of investing in Japan since 1990 to explain why he’s particularly optimistic about the opportunities ahead for a select group of companies. They include the medical equipment maker Olympus, the car components manufacturer DENSO and the takeover advisory service Nihon M&A Center.He also shares why he thinks some misunderstand Japan and why it’s no coincidence that many of the companies he backs are founder-run.Resources: Discovering the unsung superstars of Japanese technologyFrom Yahoo! to Z Holdings: the evolution of an online pioneerJapan: the small businesses with big opportunitiesInvesting in Japan: distance lends perspectiveDonald Farquharson’s LinkedIn pageAiming High: Masayoshi Son, Softbank Group and Disrupting Silicon ValleyPast podcasts Timecodes:00.00 Introduction01:40 Investing in Japan in the 1990s03:00 ‘Undiscovered’ Japan03:55 How banks and other businesses changed05:30 A sustainable recovery?06:45 An exciting time for growth companies07:45 Strong balance sheets08:15 Olympus and endoscopes09:45 Diversity on the board11:00 Nihon M&A Center and company takeovers12:50 DENSO, a major supplier to Toyota and others14:30 Toyota City, home to one million people15:35 Competition for car batteries16:30 Baillie Gifford’s advantage in Japan17:45 Looking beyond the headlines18:20 Book recommendation: Masayoshi Son and Aiming High19:45 Investing in founder-led firms Follow us via:TwitterLinkedInEmail Companies mentioned include:DENSOKoganei Country ClubNihon M&S CenterOlympusPanasonicROHM SemiconductorSoftbankToyota

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