At present I own a position in the Japan Smaller Capitalization Fund. One of the things that I talk less about in my investing, is my willingness to allow some professionals closer to the situation manage a small amount of the assets, if they have a good track record, and the area of the global markets is deeply out of favor. When I do this, it is typically for just one investment, and not more than 5% of the total portfolio.
Japanese small caps? Definitely out of favor. When I look at the top ten holdings of the Japan Smaller Capitalization Fund, I can justify holding them on a book value basis, and on an earnings basis, relative to the low interest rates in Japan, they make sense as well.
Now, the fund is trading at a premium to its NAV, so I don’t recommend purchases, at present. perhaps the ETF SPDR Russell/Nomura Small Cap Japan would be better [JSC]. At a premium of 8% on JOF, I would swap for JSC. That level would discount the good investing of JOF versus the index of JSC. Either way, I like Japanese small caps, and I am happy to hold them for a while.
Full disclosure: long JOF
WisdomTree’s DFJ is actually claiming to have a P/B of 0.95 as of 3/31. How do you feel about dividend-weighted ETFs like DFJ, or (with a different, perhaps better methodology) DWX?
Oh man, I wish I cared about this stuff so that I could sound somewhat smart when I leave a comment, but I don’t. And I’m not very smart soeven if I DID care my comment would still sound silly.
My husband, however, IS smart and reads your blog often. You can imagine my excitement when you left a comment on MY blog. I called my husband immediately to rub it in.
Thanks for the comment! You made my day.
I have a very gerneral question for David. My apologies if this has already been adressed. My queston is whether and under what circumstances you put a significant amount of your portfolio in cash or cash equivalents? If not, I assume it is because you agree with conventional wisdom that it doesn’t pay to time the market and that in general stock markets appreciate over time. I have always had trouble with this concept, and would appreciate directions to any posts examining this contention. Thanks in advance.
I am not sure if the latest post was in response to my question, but what I am asking goes beyond levering up to increase your equity exposure. What I want to know is if the stock market ever gets so expensive that you say it doesn’t make sense to be invested in equities at these levels.