Meet the Japanese tech heavyweights you’ve never heard of

The best investment opportunities are often the hardest ones to find. We analyse and consider the full length of a company’s value chain as this can reveal unique investment opportunities.

We are attracted to companies that perform a role that cannot be easily dislodged or replicated, such as the production of a component that’s crucial to a whole product. One example of this type of investment can be found in the Japanese tech industry value chain, specifically with companies such as Shin-Etsu Chemical Company and Tokyo Ohka Kogyo (TOK), .

We’re fundamental, valuation-driven investors who focus on quality companies and invest for the long-term. We look under the hood. We take time to understand what drives performance to identify those companies with a sustainable advantage, as we believe quality companies tend to reward investors over the longer term.  Our analysis also assesses the ‘fair value’ of an investment, which allows us to buy at the most compelling value and sell when we believe there’s little upside left.

Shin-Etsu and TOK could be described as niche firms, specialising in obscure materials that have become essential to the tech industry. Both are genuinely ubiquitous in growing industries, manufacturing semiconductor silicon (Shin-Etsu) and photoresists (TOK). Apple uses their wares in iPhones, Dell in their laptops, Samsung in their full range. Both have strong fundamentals that stand up to our rigorous analysis, where we look for consistent future earnings rather than prospective price changes. By grounding our decisions in an investment’s fair value, we’re positioning our investments towards greater potential for returns.

Though its name recognition is limited, Shin-Etsu is the world’s largest silicon producer, with a lasting presence that’s witnessed other silicon players wither on the vine. Founded as a fertiliser company in the 1920s, it has an enviable moat that aligns nicely with our long-term (and sometimes quiet) approach. While it’s a company that sits within the chemical sector it plays an important role as a supplier to the technology industry.

TOK started in operations in 1936 as a research lab, before being reorganised as a joint-stock company in 1940. Along with rubber company JSR, TOK is one half of what’s effectively a duopoly on component of consumer electronics. Its exacting standards have been vital to its longevity. 

As part of MSTR, Shin-Etsu and TOK, we have confidence of the long term earnings potential of these two companies and monitor all our stocks regularly for any changes to their underlying fundamentals.

 

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