The Global Value strategy composite returned 10.42% gross (10.11% net) for Q4 2017 and 25.28% gross (23.93% net) for the year.

Our previous letter outlined our reasons for increasing our portfolio holdings of Japanese equities. This move continued in Q4 and into the first few weeks of this year. Currently, we have positions in 8 Japanese equities, all of which are “small caps” and 5 of which lack sell-side analyst coverage. The fact that the majority of these companies have no analyst coverage is related to how stocks with small market capitalizations can fly under the radar in Japan and thus carry cheap valuations.

In this letter, we will explore our investment in Joban Kaihatsu Co. Ltd., a construction and civil engineering firm based in Iwaki, Fukushima Prefecture, Japan. Our thesis is based on the valuation of Joban Kaihatsu and our assessment that the market is being overly pessimistic on the Japanese construction sector as a whole. At a market capitalization of US$62 million, this company is an under-the-radar bargain. As our investment thesis is fairly simple and straightforward, this will be a fairly short letter.

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