Читать книгу Survival Kit for an Equity Analyst - Shin Horie - Страница 13

In 2008, I passed on my coverage to a colleague and became the Director of Japan Equity Research. On top of all the personnel-related matters, one of the main responsibilities of the Director of Research is quality control of the research product. From day one, for all analysts in Japan, I was required to give advice and approval for rating changes, new thematic reports, and coverage initiations via the Investment Review Committee. I had spent the previous 10 years thinking in depth about semiconductors and hardware technology, and had only limited ideas about other industries. There were many unusual words, such as cap rate, embedded value, phase three clinical trial, and metal spread. I needed to digest and study. Sometimes I spent hours discussing the dynamics of certain industries with analyst teams until midnight. It was a fascinating experience and I felt like a whole new area of my brain not previously used had been turned on.

Having attended these Investment Review Committee meetings for a few months, I was getting used to giving advice to real industry experts on their investment views. I found it absolutely fascinating to see that even 10-year or 15-year industry veterans have blind spots. As they know the industries so well and are deeply wedded to the sectors, they could sometimes miss some of the more obvious future trends. For example, when I was an analyst, a mistake I made in hindsight was being too slow to acknowledge the disappearance of film cameras and then also the decline of dedicated digital cameras. Since I knew how quickly the specifications of CMOS (complementary metal-oxide semiconductor; essentially the eye of the digital camera) image sensors and lens technologies had been progressing as a semiconductor analyst, I should have predicted the major decline of digital cameras earlier.

In a similar vein, discussions with the auto sector analysts on electric vehicle transition were also interesting. Auto-sector analysts have often said in the past that the pure electric vehicle adoption would likely be slow because the batteries are too heavy and too expensive, and automakers did not want to focus on this business because it was loss making. But I argued that I had seen many technologies advance faster than expected when the whole industry focused their efforts on it, and also it is ultimately the consumer who decides what to buy, not the car makers. While I don't think I always get the advice right, listening to the analysts present their high-level views and quickly identifying the blind spots without knowing too much detail is an extremely valuable skill I learned through the experience. I really wished I had listened to presentations by other analysts more when I was a coverage analyst and figured this out earlier.

During my tenure as the Director of Japan Equity Research, Japanese equity was not popular with investors – low profitability, slow to implement changes, poor corporate governance, and fierce competition from the rest of Asia. One day in 2010, when I went to see a client in Edinburgh, Scotland that was known for long-term selective investing, the veteran portfolio manager told me that our research was useless because it did not address the core value of a company at all. Hence, he gave no business to us. He said he was only interested in Japanese companies that he could buy, forgot about for five years, and that would outperform the market. I went back to Japan, discussed with our analyst population and decided to launch a ‘Japan 2020’ series. This research series was basically to select several companies in Japan where the analysts felt strongly about sustainable growth potential in the next 10 years and then undertook a deep dive on the industry structure analysis and prepared 10-year financial projections. Some reports took almost six months to prepare and the research team successfully published a number of Japan 2020 reports in the following 12 months. Those reports were very well received, in particular by overseas investors who had historically disliked Japanese equities. The corporates also appreciated our efforts. It was a great learning tool for our analysts to go beyond the normal forecast time horizon. A year later, I went back to Edinburgh to see the same portfolio manager and I was very pleased to find he had read all of the Japan 2020 reports in detail.