Fund manager’s diary

Ruth Nash is the manager of the JOHCM Japan fund. Her diary runs from 24-29 September.

FS Ruth Nash 450 Large

Monday The first two days of my annual research trip to Japan were spent in Osaka. It was a while since I had spent more than a day there, so it was a good opportunity to get a better feel for the economy in the west of Japan. The thing that surprised me most was how relaxed everyone seemed to be about power supplies. I was expecting to see similar power saving measures to those I saw in Tokyo last year: fewer neon lights, escalators turned off and buildings dimly lit inside. Not here.

Tuesday I met one of our fund holdings, Panahome, a subsidiary of Panasonic. It might seem surprising that Panasonic has a housing division, but, with the focus on eco homes and “smart cities”, there are some synergies. Like a number of our fund holdings, the company has a strong balance sheet and there is a good chance it will be bought out by its parent at some stage.

Wednesday Off to Tokyo for more meetings. I visited a number of different companies in cyclical industries. If there was a consistent message, it was that management teams felt things were unlikely to get much worse from here, but there was no reason to expect a sharp recovery whilst the world economy remained under such pressure. Tokai Carbon’s CFO commented that, bad as the current situation is, it is definitely not as bad as it was after Lehmans. This remark struck me as interesting, as the market is valued as if the current slump is as bad, if not worse, than Lehmans.

Thursday Another consistent message from the Tokyo companies was that construction costs are rising sharply in Tohoku, the north-eastern area of Japan badly affected by the natural disasters, as rebuilding work finally gets underway. Max, a manufacturer of staplers and nailers used in the housing industry, said there was a boom in the area and that construction workers were earning more money and buying expensive nailers with their cash. Mitsui Home commented housing construction costs were starting to rise. Yet in Osaka, Panahome said they had seen no impact whatsoever. So it is not yet a nationwide phenomenon and it is still very modest, but there are finally some signs that the rebuilding work is starting to have an impact.

Friday I took a trip to Kanagawa prefecture to visit Aida Engineering. I think I may have been their first ever foreign visitor. When I arrived, they were flying a Union Jack from one of the three flagpoles outside their building. In 2years of visiting Japanese companies, I have never had a flag flown in my honour before. Of course, the danger with such a welcome is that you confuse a nice meeting with a good company, but I think Aida provided both. This tiny little company is the world leader in huge servo press machines, which are increasingly being used in the auto industry to make body panels for cars. The outlook for the next few years is for steady growth and gradually improving margins.

Saturday I took the Limousine Bus Company’s service to the airport and was leafing through their magazine when I came across a great piece describing the company’s customer service department. For me, it encapsulated neatly everything that is great about Japan and also frustrating – sometimes companies are so focused on providing a service to their customers that they forget about making money.