Nippon Active Value (NAVF) launched last month on the London Stock Exchange, raising £103m (click here to read more). The company is an activist investor in smaller Japanese companies. It has released an update on its progress since launching.
“It would be an understatement to say that market conditions have changed over the last month. The world is now gripped by a pandemic the likes of which has not been seen in a century, the oil price has collapsed in the midst of an unprecedented price war between producing countries and economic activity has all but seized up in a large part of Western Europe. The Japanese stock market, as measured by the broad Nikkei 225 Index, has fallen more than 29 percent. It has been a good time to be holding cash! We take some comfort from the data that suggest Japan has had some success in slowing the spread of the virus.
Against this background, NAVF has begun investing the proceeds of approximately £103m from the initial public offering. We have converted most of our cash balances to Japanese Yen, reserving some sterling to pay ongoing administrative expenses. To date, we have invested slightly more than £29m in 15 of our initial group of target companies. We have been deliberate and careful both in our foreign exchange transactions and in our stock purchases. We have not “chased” shares but have allowed dealers to offer us blocks as they become available and our trading has generally represented less than half of the shares traded on any given day. Naturally some shares have been more liquid than others but, overall, we are satisfied at our rate of progress. If we find that any of our portfolio companies is simply too illiquid, we will add additional companies to our list of targets.
We had indicated that we believed the portfolio, once fully invested, would consist of up to 20 names and that it might take us up to six months to become invested. Those estimates still seem reasonable at this juncture. To that end, we have added five additional names from our target list and will begin purchasing shares in those companies as well. Because some of our targets are larger in market capitalization, we expect to be able to deploy more capital in certain names. Generally, we are aiming for a reasonably balanced portfolio across all of the companies in the portfolio.
The net asset value of NAVF, measured in sterling, has risen slightly since inception. While some prices have fallen in Yen terms, this has been largely offset by the Yen’s appreciation against sterling. Overall, it’s swings and roundabouts. We continue to buy shares nearly every day and, for the past month, prices have declined fairly steadily. It’s always a bit painful to see the prices of securities one owns erode; but for a value investor with cash, a falling market is a valuable gift.”
NAVF: Nippon Active Value updates on progress after £103m February IPO