Today, I added 50 shares of the ADR to Recruit Holding Co. at $6.65 and wanted to do this impromptu article to explain my reasoning.
$RCRUY Is the ADR for Japanese company Recruit Holdings Co. With Japan having a fundamental shift in macro conditions this year, their market is performing better than most as you can see in the chart below.
Analysts expect their GDP growth to outperform. Even with recent gains, Japanese valuations are still more attractive than most established economies and offer better opportunities for positions with yields and buy-backs at cheaper valuations.
My thinking for $RCRUY specifically is that working age populations are falling in many key markets, especially Japan. As Japan’s economy reopens and labor markets remain tight in key areas, HR solutions & tech that Recruit offers (Indeed, Glassdoor, etc.) will be very important.
But $RCRUY isn’t primarily tied to Japan, as their products are global and roughly 70% revenues come from outside the country. So why look for a Japanese company if it’s not even focused in the country? Having exposure to the trend in Japan and the trend in the labor market seems like a winning combination to me, that’s why!
Many Japanese companies are experiencing a sea change in how they manage and operate due to changing governance rules. Companies have been encouraged to pay more attention to their P/B, buybacks and attractive dividend yields are tools they can use to prop up valuations.
This is huge news, especially in a country that already has a strong investing culture. Capital inflows into Japan have been growing. Hell, it even caught Buffett’s eye! He’s been growing his Japanese positions substantially.
$RCRUY is positioned like a growth stock, so it’s valuations may be higher than what others are looking for when they stock pick in Japan. Though $RCRUY has higher valuations than most, their valuations are not close to average valuations they have seen prior to the pandemic. Volume and chart seems indicative of price appreciation and the marco trends should prove to be additional winds in their sails.
I will be swinging this around the 6-12 month time frame as macros progress. I am open to adding to the position on potential downsides.
That’s all! I’ll catch you guys tomorrow for the Games N Gains twitch stream!