Thread by @marketplunger1

COVID has caused global indices to post poor YTD returns:

- FTSE 100: -26%
- Nikkei 225: -1.37%
- DAX: -12.14%

Yet one index is just crushing it:

- Japan's Mothers Index: +37%

It's one of the most under-fished corners of the market.

Let's learn 👇

macro-ops.com/japans-mothers…

1/ What is The Mothers Index (MOS)?

- The name stands for "Market of the high-growth and emerging stocks.

- It's venture capital-type companies in public markets.

- These are SMALL biz (@iancassel enters chat) w/ average market cap of $10M USD

- Dominated by ST traders

2/ What You Can Buy There

What gets me excited about the MOS is the type of companies available.

Most companies on the MOS involve one of the following:

- Telemedicine
- Robotics
- Ecommerce
- Artificial Intelligence
- Teleworking
- Cloud Servicing

No wonder its up 40%!

3/ Management Teams Have Skin In The Game

Another thing that surprised me was the amount of insider ownership in these smaller Japanese companies.

It's normal to see 30-40% of shares owned by the founder/CEO.

In fact, most of the companies listed are run by founder-led CEOs

4/ *Very* Little Analyst Coverage / Institution Ownshp

Thanks to $10M average market cap, many companies fly under the radar of analysts / institutions.

Here's some stats:

- 61.7% analyst coverage on TSE
- 33% coverage on MOS

What's left is short term trading (Robinhood-y)

5/ That's Great, But Why Now?

Japan's population is aging ... fast.

To compete on the global stage Japan needs to innovate. They have to find a way to get more done with less people.

As such, technology will be a HUGE part of that initiative.

This = major sec. tailwinds

6/ Recap of Mothers Index

Before we dive into four industries RIPE for innovation, let's review why we love the Mothers Index over the next 5-10 years:

a) Exciting industries w/ tailwinds
b) Low share count
c) Small cap
d) Founder-led w/ skin in game
e) Little analyst coverage

7/ Four Industries Ripe For Disruption

Investing in companies on the MOS = going long Japanese disruption.

There's main areas we want to bet on:

- Retail
- Financial Services
- Healthcare

We'll highlight the problems, potential solutions and companies trying to do it now!

8/ Disrupting Retail

Problems:

- Highly fragmented
- Low margins b/c zero scale
- Expanding floor space but no IT invest
- Small average transactions w/ high overhead

Solutions:

- Reduce store size
- New IT, not legacy
- Understanding cust. wants

Biz Idea: Smaregi (4431)

9/ Disrupting Fin. Services

Problems:

- Low customer loyalty
- Risk-averse client base
- Little online footprint
- 2012, >50% assets in cash

Solutions:

- Back-end automated software
- Develop better online banking solutions
- Better cust. analytics

Biz idea: Freee (4478)

10/ Disrupting Healthcare

Problems:

- Long patient stays = economic losses
- Lack of secondary care facilities
- Avg. stay is 3x > than other countries

Solutions:

- Electronic medical records
- Connecting hospital tech
- Hospice
- PT clinics

Biz idea: Japan Hospice (7061)

11/ Must-Follows in Japan

If any of the above sounds interesting, you *must* follow these peeps:

- @willschoebs
- @WillThrower3
- @janeo1934
- @japan_value

I was told @TheStalwart would enjoy reading this. Joe, if you're reading, thank you!

/Fin

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