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In this article, I would like to try to summarize the recent analysis in this paper.

Metrical Analysis
We began analyzing corporate governance of Japanese companies in full swing in June 2015, covering 500 companies at that time. Since then, from February 2018 to the present, I have analyzed approximately 1,800 companies. These 1,800 companies are used as the universe and are updated monthly based on publicly available information such as annual securities reports, corporate governance reports, and financial statements. Metrical’s corporate governance analysis is divided into Board Practices and Key Actions. This is because even if the board structure and other board practices are formally in place, it is skeptical that they are being used to manage the company to create value. This is based on the hypothesis that, ideally, improvements in corporate governance will lead directly to value creation, or that improvements in board practices will create value through key actions such as cash allocation, share repurchases/reirements, etc. Therefore, I believe that key actions should be added to corporate governance evaluations.

In July, the stock market was highly volatile, rising sharply at the beginning of the month, then falling sharply toward the end of the month, before recovering at the end of the month. In July, the CG Top 20 significantly outperformed the TOPIX and JPX400 for the third consecutive month. The July stock market, which […]

One year has passed since the TSE requested a P/B increase at the end of March 2023 (“Request for action to achieve cost of capital and stock price conscious management”). Valuations are expected to increase as stock prices rise. In this analysis, I examined what trends were observed in the companies that increased their Tobin’s Q in the Metrical universe during the period from March 2023 to March 2024.

In the comparable Metrical universe of 1,750 companies from March 2023 to March 2024, the analysis is divided into 5 groups (>50% increase, >25% to <50% increase, >0% to <25% increase, no change, and decrease) for each item in terms of the percentage change in Tobin's Q. The median percent change in Tobin's Q during this period was 2.06%. The table below profiles the 1,750 companies in the Metrical universe, dividing them into five groups (>50% increase, >25% to <50% increase, >0% to <25% increase, no change, and decrease) by the percentage change in Tobin's Q over the one-year period from March 2023 to March 2024. We can see that companies whose Tobin's Q increased by more than 50% include those with high Tobin's Q, average ROE and ROA over the past three years, and foreign shareholding ratios. Although companies whose Tobin's Q rose by more than 50% in terms of market capitalization gave up the top spot to companies whose Tobin's Q rose by more than 25% but less than 50%, the relatively large market capitalization of these companies caused their Tobin's Q to rise. The companies whose Tobin's Q increased by more than 50% and by more than 25% but less than 50% continued to increase their ROE and ROA.

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I would like to examine which companies have experienced an increase in stock valuations over the past year, and have analyzed the characteristics of the 1,755 companies in the comparable Metrical universe whose Tobin’s Q increased between the end of December 2022 and the end of December 2023. The table below shows the median value of the change in Tobin’s Q for each of the six groups.

April’s stock market returned to values toward the end of the month, although the swing was large throughout the month.
The CG Top 20 stock market outperformed both the TOPIX and JPX400 in April by a wide margin.

Weakness in the U.S. stock market due to concerns about the risk of prolonged inflation and selling of semiconductor sector stocks caused Japanese stock prices to fall from mid-month, but the yen continued to weaken due to the Bank of Japan’s ongoing monetary easing, leading to a buying bounce toward the end of the month.

The TOPIX and JPX400 indexes gained -0.77% and -0.30%, respectively, in April, while the CG Top 20 index underperformed both indices by 1.30%.

The composites of CG Top 20 stocks has been replaced as of July 1.
Wacom (6727), K’s Holdings (8282), Eisai (4523), NSD (9757), and Trend Micro (4704) were new additions, while Ebara Corporation (6361), Orix (8591), United Arrows (7606), Tokyo Gas (9531) and Hoosiers Holdings (3284) were removed. Details of the component stocks are shown in the table below.

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