Key Facts
• Japanese stock market shows signs of shifting from large-cap to small-cap focus in 2024.
• Small-cap stocks on the Tokyo Stock Exchange Growth Market are gaining attention.
• Growth Market allows listing of companies with high growth potential despite low revenue or profit.
• A quiz compares two fictional biotech companies, A and B, for investment evaluation.
• B Company has a Price-to-Sales Ratio (PSR) of 100, indicating overvaluation.
• PSR is calculated as “Stock Price ÷ Revenue per Share.”
• Companies with less than ¥1 billion in revenue pose high investment risks.
• Companies with over ¥10 billion in revenue and high growth rates are promising.
• The author, a 25-year fund manager, avoided stocks with PSR above 20.
• Long-term small-cap investments require careful evaluation of revenue and growth potential.
Summary
The Japanese stock market is shifting focus to small-cap stocks, particularly those listed on the Tokyo Stock Exchange Growth Market. These stocks, while offering high growth potential, often come with high risks due to low revenue or profit. A quiz comparing two fictional biotech companies highlights the importance of evaluating revenue and growth rates over traditional metrics like Price-to-Earnings Ratio (PER). The author emphasizes using the Price-to-Sales Ratio (PSR) as a key metric, avoiding stocks with PSR above 20. Companies with revenue exceeding ¥10 billion and strong growth rates are considered promising, while those under ¥1 billion pose significant risks. This approach is crucial for long-term small-cap investments.
