[Investor-Analysis] Top 5 Japanese Stocks With The Peter Lynch Strategy
The strategy that made Peter Lynch the legend he is today.
The “The 5 Best Japanese Stocks With the 5 Best Formulas for Value Investing” saga continues!
This week I am presenting the 5 most valuable Japanese stocks through the magic method of perhaps the most famous value investor of all time, Peter Lynch!
In the early 1980s, a portfolio manager named Peter Lynch was quickly becoming a legend in the investor world, and for very good reason.
When he took over the Fidelity Magellan mutual fund in May of 1977 (his first job as a portfolio manager), the assets of the fund were worth USD $20 million.
Between 1977 and 1990, he proceeded to turn it into the largest mutual fund in the world, outperforming the market by a mind-boggling 29% per year annualized!
Lynch accomplished this by using very basic key numbers to filter out companies that have a high profit growth compared to its valuation:
Growth is valued in the form of low PEG (Price/Earnings to Growth Ratio). Price is the price per share. Earnings to Growth Ratio is usually calculated by taking the Earnings Per Share (EPS) for this year and divide it by last year’s EPS.
As a general rule, a PEG ratio of 1.0 or lower suggests a stock is fairly priced or even undervalued. A PEG ratio above 1.0 suggests a stock is overvalued.
In addition, stable sales and Earnings Before Interest and Taxes (EBIT) growth as well as a stable cash flow, profitability and a market cap lower than $4 billion USD.
Secondly, these companies have been vetted by my tried and true Value Vetting Strategy:
A P/E less higher than 6 but lower than 25
An average Earnings Growth higher than 7 over the past 7 years
Return on Equity at at least 10%
A dividend yield higher than 0.5%
Net debt / EBITDA lower than 2
The 5 Best Companies According to the Peter Lynch Strategy
To download the list of all the numbers used in the Peter Lynch analysis, click here:
The top 5 companies on these list are all incredibly undervalued, have very solid long term profits and an incredibly low risk of going bankrupt. They are ranked in the top 5 because the highest earnings growth of any company filtered by the strategy!
Below, you can read more about each company.
*If any company peak your interest, just write to me in the comment section and I’ll send you all information needed to make an informed decision before buying its stock!
1. Medius Holdings
MEDIUS HOLDINGS Co., Ltd. is mainly engaged in the sale and maintenance of medical equipment, as well as the sale and rental of nursing care equipment.
The Company operates through two business segments: Medical Equipment Sales & Care and Welfare.
The Medical Equipment Sales segment sells medical equipment to domestic healthcare facilities, such as hospitals.
The Care and Welfare business segment is engaged in sales and rental of nursing care equipment purchased from Japanese nursing and welfare equipment manufacturers, agents, trading companies, to medical institutions such as domestic hospitals and general individuals.
In addition, the Company is also engaged in sales of nursing care and welfare equipment purchased from domestic and foreign manufacturers to medical institutions such as hospitals and medical material dealers.
2. Askul Corp
Askul Corp is a very well known company in Japan, and its brand is seen around Japanese cities as much as boxes from Amazon, Fedex and UPS.
The company is mainly engaged in the development of e-commerce businesses.
It operates in two business segments: E-Commerce & Logistics.
The E-Commerce segment is engaged in the sale of office automation (OA) and personal computer (PC) supplies, office supplies, office daily necessities, office furniture, groceries, alcoholic beverages, pharmaceuticals and cosmetics.
The Logistics segment provides logistics and small freight transportation services for companies and real estate asset management business. The Company is also engaged in the manufacture and sale of water.
3. Shinko Electric
SHINKO ELECTRIC INDUSTRIES CO., LTD. is a semiconductor package manufacturer.
The Company operates through two business segments: Plastic Packaging & Metal Packaging.
The Plastic Package segment is engaged in the development, manufacture and sale of plastic laminated packages (PLPs), as well as the assembly and sale of integrated circuits (ICs).
The Metal Package segment manufactures and sells semiconductor lead frames, semiconductor glass-to-metal seals, heat spreaders and ceramic electrostatic chucks, among others.
4. Pharma Foods International
Pharma Foods International Co., Ltd. is mainly engaged in the mail order and functional materials business.
The Company operates through three business segments: Mail order, Functional materials & Biomedicine
The Mail Order segment is engaged in the sale of supplement Tamagosamin, cosmetics Pearl Skin Lanchel and Derma QII Mild Peeling Gel, through advertising media such as televisions and radios.
The Functional Materials segment is engaged in the development and sale of functional materials such as GABA, Bonepep, Folic Acid eggs and Chicken Egg Antibody. The Company is also engaged in the planning and sale of original equipment manufacturer (OEM) products such as supplements and beverages.
The Biomedical segment is engaged in the antibody contract manufacture business for drug discovery and diagnostics, and life science information (LSI) business for analysis and efficacy evaluation test of materials and products.
5. Ceres Inc.
CERES INC. is primarily engaged in the mobile service business.
The Company has two business segments: Mobile Service & Financial Services.
Its Mobile Service segment conducts point media business that encourages registered various actions on the Internet with incentive points that can be exchanged for electronic money, and content media business that earns advertising fees by success reward type smartphone media.
The Financial Services segment conducts investment development business, smart phone settlement business, virtual currency related business and others.