South of the famous temples of Kyoto, where factories and subsidized homes dot the landscape, a single skyscraper stands out. Perched at its top is Shigenobu Nagamori, replete in a luminous green tie, pocket square and spectacles, holding forth on his distinctive business ways.
If you work for me, the billionaire chief executive officer of Nidec Corp. says, you’ll never be fired for lacking talent, but don’t count on taking many holidays. If you buy shares in the $27 billion electronics giant I started in a shack beside my mother’s farmhouse, forget about asking for bigger dividends. Even if you’re Masayoshi Son, the second-richest man in Japan, you can expect an earful when I think you’re wrong.
“I’m a strange man, an odd man,” Nagamori, 71, says in an interview from Nidec’s headquarters in Japan’s ancient capital, with his old prefabricated shed preserved in the building’s lobby 19 floors below. “I push against the grain.”
As everyone from Prime Minister Shinzo Abe to activist investor Dan Loeb urges Japan Inc. to listen more to shareholders and update traditional labor practices, Nagamori is ignoring calls for change -- and trouncing his peers in the stock market. He’s an outspoken reminder that for some Japanese companies, an approach that looks strange by the standards of Wall Street can still deliver outsized returns.
Nagamori’s firm has bucked a slump in Japan’s Topix index in 2016, advancing 5.3 percent through Thursday as earnings climbed to a record for the third straight year. Nidec’s 457 percent rally from its global financial crisis low in 2008 through Thursday was about eight times bigger than that of the benchmark stock gauge, while the company’s return on equity stands at 12.1 percent, versus 6.8 percent for the Topix. Nidec’s shares fell 0.3 percent in Tokyo on Friday.
Savvy deal-making has been key to Nagamori’s success. Since its founding in 1973, Nidec has purchased more than 40 companies, including the $1.2 billion acquisition of Emerson Electric Co.’s motor, drive and power-generation businesses this month. Before that deal was announced, Nagamori said he had a 1 trillion yen ($9.8 billion) war chest to expand Nidec’s business of making precision motors for everything from refrigerators to cars. He’s looking at areas including self-driving automobiles and the internet of things.
“When it comes to M&A, Nagamori is the best in Japan,” says Mitsushige Akino, a Tokyo-based executive officer at Ichiyoshi Asset Management Co., which oversees $1.2 billion. “As an investor, I feel safe with him.”
Nidec hasn’t been immune to the turbulence in Japanese markets. While the stock was up this year through Thursday, it was 18 percent below an all-time high reached in August 2015. Analysts see little upside over the next 12 months, with the average share-price target price tracked by Bloomberg just 2.4 percent above Nidec’s closing level on Wednesday.
Safety Net
Succession could be the company’s biggest risk, according to Akino. If the founder ever needs to step down and the transition isn’t smooth, Nidec could lose its “Nagamori premium,” the money manager says. The stock trades at 28 times estimated earnings, more than twice the average for Topix companies.