20% EBIT CAGR With A Walmart Twist – TYO: 3349 Cosmos Pharmaceuticals

Thinking Points

  • Cosmos Pharmaceuticals (TYO: 3349) operates drug stores with a Walmart and 7-Eleven-like strategy, delivering industry leading growth (20% 10 year EBIT CAGR) over the past decade.
  • The company’s larger than normal stores target small areas and resembles a neighborhood supermarket.
  • At 18x EV/EBIT, Cosmos is a high quality business trading at an even higher price.

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Drug Stores Inconveniencing 7-Eleven

Thinking Points

  • Drug stores are entering convenience territory, offering goods typically available at convenience stores.
  • Convenience chains are fighting back by slowly working into the more regulated OTC drug market, mostly through partnerships with drug and pharmacy chains.
  • The distinguishing characteristics of the convenience, drug store, and pharmacy industry are less apparent now.

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Progress, Not Perfection – Lessons From A Japanese Executive Chef

Thinking Points

  • I had the opportunity to spend a whole week with a Japanese executive chef.
  • Through his work and careful explanation, the chef shared insights on thriving in the food industry.
  • The chef’s approach largely incorporated the concept of intrinsic value, a core concept used in value investing.

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Idea: Japan’s American-inspired IKEA competitor going global – Nitori Holdings (TYO: 9843)

Thinking Points

  • Nitori (TYO: 9843) has delivered outstanding performance with a lovable story.
  • Going above and beyond with its “high quality, affordable products” branding, Nitori is Japan’s most loved furniture brand.
  • At 20x EV/EBIT, however, a considerable level of growth is already priced in. I’ll take another look if share price gets below 10,000 yen vs. today’s 16 ~ 17,000 yen.

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Why I Don’t Invest In Japanese Construction

Thinking Points

  • Japanese construction companies flood value-focused quantitative screens.
  • Japanese construction doesn’t necessarily transfer well in other regions.
  • My avoidance of Japanese construction is simply a decision heuristic, not a suggestion that everybody should avoid Japanese construction.

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Announcement: Newsletter Launch + Content Changes

Summary

  • First Kenkyo newsletter will be issued on October 16th, 2017.
  • Sample newsletter issue, newsletter description page, and payment portal will go live on October 9th, 2017.
  • Minor content changes coming up with newsletter launch.

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Idea: Consistent 60+% Greenblatt ROIC For… Weather Data? – Weathernews (TYO: 4825)

Thinking Points

  • Weathernews is one of the world’s largest private weather data service.
  • After its start in Ocean route planning, Weathernews now offers consulting and data services to airlines, railroads, TV stations, consumers, and many other areas.
  • Leveraging its healthy ROIC performance, Weathernews is exploring different avenues for market and service offering expansion.

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Idea: An Alternative To Activision Or Electronic Arts – Capcom (TYO: 9697)

Thinking Points

  • Capcom (TYO: 9697) is just getting started with digital distribution.
  • With strong Intellectual Property (IP) like Street Fighter and Resident Evil, Capcom is well grounded.
  • If you missed the Activision and/or Electronic Arts digital distribution wave, you might want to consider looking at Capcom.

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