Japan has long been one of the world’s most stable real estate markets—and it’s no surprise that hordes of investors are eagerly eyeing its consistently good rates of return. But for one savvy stock picker, betting on Japanese real estate has paid off in a big way. Hiroshi Tanaka made his mark by correctly predicting which areas in Japan would benefit from government-funded infrastructure projects and other developments. His strategy enabled him to beat 99% of peers who were also investing in the market. In this blog post, we will take a closer look at how Tanaka was able to outsmart the competition and what lessons can be taken away from his success story.

The Stock Picker’s Strategy

There are many different strategies that stock pickers use to try to beat the market, but one strategy that has proven to be successful is investing in Japanese real estate. This strategy involves picking stocks that are undervalued by the market and holding onto them for the long term.

One reason why this strategy works well is because Japanese real estate is often overlooked by global investors. This means that there are usually plenty of bargains to be found. Another reason is that the Japanese economy is very stable, meaning that investments in real estate tend to be less risky than other types of investments.

If you’re thinking of using this strategy, it’s important to do your research and pick stocks carefully. You should also be prepared to hold onto your investments for several years, as they may take some time to appreciate in value.

Results

In the 12 months through March 2019, the Japan Real Estate Select Stock Fund returned 8.6 percent while its benchmark, the Topix Real Estate Index, gained 5.8 percent. The fund’s outperformance was driven by its holdings in major Japanese real estate companies such as Mitsubishi Estate Co. and Sumitomo Realty & Development Co., which both posted double-digit returns over the period.

The Japan Real Estate Select Stock Fund is a mutual fund that invests in Japanese real estate companies. The fund is managed by Tokyo-based asset management firm Sparx Group.

As of March 31, 2019, the Japan Real Estate Select Stock Fund had $1.1 billion in assets under management. The fund has a minimum investment of $1,000 and charges an annual fee of 0.85 percent.

Why It Worked

There are plenty of reasons to like Japan’s real estate market. It’s the world’s third-largest economy, has a population of 127 million people, and is home to some of the most iconic companies and brands.

And yet, despite all of these positives, the Japanese real estate market has been in a slump for years. Property prices have been falling since 1991, and there’s no end in sight to the decline.

So how has one stock picker been able to outperform the vast majority of his peers who are betting on a rebound in Japanese real estate?

The answer lies in two key decisions: timing and focus.

First, the stock picker bought into the Japanese real estate market at just the right time. He started buying shares of major developers when they were at rock-bottom prices in early 2016. Since then, prices have recovered somewhat, but they’re still well below their peak levels from a decade ago.

Second, the stock picker focused his investments on developers with exposure to the office sector. This was a wise choice, as office properties have been one of the few bright spots in Japan’s otherwise struggling real estate market. Rents for prime office space in Tokyo have actually been rising in recent years, thanks to strong demand from foreign companies looking to set up shop in Japan.

Conclusion

As this article has illustrated, betting on Japanese real estate can be a tricky task. However, with the right approach and skillset, it is possible to make smart investments that will result in massive returns. By following the example of Masayuki Noguchi, it is possible to achieve success as even when investing in an already saturated market such as Japan’s. Understanding what factors determine property prices and how sentiment affects them are essential ingredients for anyone looking to follow suit and beat 99% of their peers.