Nomura Securities Co. is the undisputed champion of Japanese investment research, according to participants in Institutional Investor’s 19th annual All-Japan Research Team survey. Not since 2009, when Daiwa Institute of Research reigned supreme, has a single firm had the survey’s top spot all to itself. The following year Daiwa Securities Group and Nomura tied for first place, and in 2011 Nomura shared the winner’s circle with Bank of America Merrill Lynch.
Japan’s oldest brokerage house captures 27 total team positions, three more than last year and three more than second-place BofA Merrill, which holds steady with 24 positions. UBS, in third place for a fourth year running, wins 22 positions, an increase of four. Deutsche Securities adds the most to its team total — eight — bringing its count to 20; that’s enough to propel the firm up two notches to fourth place. Morgan Stanley MUFG Securities Co. rises one rung after picking up three positions, for a total of 15. Survey results are based on responses from nearly 1,000 individuals at some 320 institutions that manage an estimated $1 trillion in Japanese assets.
Nomura has undertaken a number of changes since the beginning of last year. Jun Konomi became director of Japanese equity research in January 2011 after Nobuyuki Takagi moved to a more senior position in global research. One of Konomi’s first assignments was to trim his research operations as part of a $1.2 billion companywide initiative to cut costs. He had just begun to implement a plan that would shrink his research department head count from 61 to 52 and reduce the number of companies those analysts cover from 605 to 569 when northeastern Japan was rocked by a devastating earthquake and tsunami.
Japan is still recovering from those disasters, but Konomi says the economy has absorbed the effects and the market holds opportunities for investors. “Japanese equities are very cheap — and Japanese equities are very strong, compared with other countries’,” he observes.
UBS lays claim to a laudable distinction; the Swiss bank has more analysts ranked No. 1 in their respective sectors than any other bank. A lot more. Ten UBS analysts capture pole positions — that’s twice the number claimed by the firms that tie for second place when measured by this metric, Nomura and Deutsche. Put another way, UBS analysts win the top spot in nearly one third of the survey’s 32 sectors. Two of those analysts have spent at least a decade in first place: Jun Harada in Transportation (11 straight years) and Atsushi Yamaguchi in Metals (ten years). Honorable mention goes to Toshihiko Okino, now in his ninth year at No. 1 in Housing & Real Estate.
These accomplishments are all the more remarkable given the degree of turnover elsewhere in the survey. The analyst at No. 1 in 11 of the 32 sectors did not hold that position last year. Ballot revisions explain some of this phenomenon. II added two sectors, Ceramics & Glass and Fixed-Income Strategy, and combined Retailing/Convenience & Specialty Stores with Retailing/Department & General Merchandise Stores to create one overall Retailing sector. In addition, we expanded the Insurance sector to reflect the broader Insurance & Other Nonbank Financials industry.
Ballot changes notwithstanding, only one analyst debuts atop a sector in which he hasn’t previously ranked: Sumito Takeda in Software/Entertainment. This researcher is hardly unknown, however. Takeda was No. 1 in Software/Business in 2010 and 2011, and he finishes in second place in that sector this year. (He also ranked previously in OTC & Small Companies, most recently in 2006.) His firm? UBS.