My Japanese SAAS stocks were 2 cloud accounting companies: Freee (4478) and Money Forward (3994). Got these ideas from Asian Century Stocks. Since I bought them in Feb, they've been pushed up by good results, a buoyant Japanese stock market, and a recovery in software stocks being hurt by AI.
Sold them today. Average over 40% gain in 8 months. Supposed to sell Friday but busy at work.
Why did I sell?
- Market share data is hard to come by. There is a big private competitor (need Japanese VPN), Yayoi, that has a large market share in legacy (desktop) accounting software. They claim to have 560,000 active contracts (one or more users per contract) which is more than either Money Forward and Freee, and probably more than both.
- Both Freee and Money Forward are still in early growth stage, where PEs are not meaningful. Price to sales. The story is that they will grow profitable by converting greenfield users. They may - recent growth figures have been good.
- I think we're at the end of the economic cycle, the current AI boom is ending. Like 2001. Stocks probably get hit, especially growth stocks. I don't want to hold "Price to sales" stonks into a downturn.
- One of Hedgeye's signals for Japanese equities turned negative. last week It was on a day that everything fell (Oct 15th), so it could be a false alarm. But given everything else, now's a decent time to sell.
I may be missing out in two multi-year compounders. But I also may be missing out on a market correction.
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