Fortune Rota Volvitur: Part 4

(Jun 2018) Further analysis based upon Mark's speech at the London Value Investors' Conference in May 2018.

The prevailing extremely wide valuation spreads represent a record “carry” differential between earnings yields and book value backing of long positions over shorts. We model the impact of this carry differential and show that the accumulation of profit and shareholders’ equity will overwhelm short-term price effects to drive exceptional long-term returns from a long-short value strategy.

Preface

This note is based on a talk delivered at the London Value Investors’ Conference (“LVIC”) in May 2018 in which I discussed the progress of Japanese economy and stock market over the past four decades. I gave an assessment of the state of value investment today a reminder of Arcus Funds’ alpha[1] and of the prospects for value investing in the coming decade.

We have prepared this note as an update to our series of “Fortune Rota Volvitur” reports on value investing in Japanese equity market, which we began in 2016.

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[1] Arcus Investment Limited (“AIL”), Arcus Investment Asia Limited (“AIAL”) and Arcus Research Limited, Japan Branch (“ARL”) are collectively referred to as “Arcus” or the “Arcus Group”.

Arcus Japan Fund (“AJF”), Arcus Japan Long/Short Fund (“AJLSF”), Arcus Zensen Fund (“Zensen”), Arcus Genseki Fund (“Genseki”), Arcus Japan Value Fund (“AJVF”), collectively referred to as the “Arcus Funds.”

Past performance should not be construed as an indicator or a guarantee of future results.