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How Oasis Capital Management Identifies Value Opportunities

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The Eighth Annual Sohn Hong Kong Virtual Investment Leaders Conference is scheduled for Sept. 9, and one of the speakers set to make a presentation is Seth Fischer of Oasis Capital Management. Fischer and his firm are running activist campaigns with many Asian companies right now.

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In an interview with ValueWalk, he gave us some insight into his process and how some of the firm's positions are doing right now. He wouldn't say much about what he is planning to present at Sohn, but he did say he will be presenting a company in which he sees 100% upside from the current stock price.

Stay tuned for post coverage next week!

How Oasis Capital Management Identifies Opportunities

Fischer described his firm as "deep dive, bottom-up, micro-opportunity investors." He said they look at all sectors to identify companies that have intrinsic value that's much higher than their current value.

"Often those companies will need help to get there," he explained. "Sometimes 'getting there' means pursuing new business opportunities. Sometimes that means improving margins by investing in technology or shutting down money-losing divisions. Sometimes it means improving capital efficiency and corporate governance."

We asked him about an investment that played a major role in his career path, and he chose their early engagement with Nintendo. He said that investment caused them to become more involved in activism in Japan.

"Our early engagement with Nintendo, and their subsequent expansion of IP across mobile and other platforms, helped galvanize us to increase engagement investments in Japan -- even in the cases where management is initially reluctant to take new steps to increase corporate value," he said.

Progress With Mitsubishi

One of the positions Fischer highlighted in the interview was Mitsubishi Logistics. They made several shareholder proposals that were presented at the annual general meeting and outlined those proposals on a website.

The Oasis Capital Management team asked Mitsubishi Logistics to buy back ¥10 billion worth of shares and add truly independent directors to its board. They also asked the company to abolish its "komons," which are former presidents that were still guiding company decisions as consultants. They also called for a three-committee corporate structure.

Although their proposals were voted down at the general meeting, Mitsubishi Logistics has gone along with most of them.

"Our proposals lost at the AGM," he told ValueWalk. "Since then, the company introduced stock-based compensation, announced a buyback, abolished two komons, sold land, introduced an optional nomination and remuneration committee, and is considering one of our proposed director candidates."

Winning And Losing Positions

When asked about one of their big wins, Fischer talked about Sun Corp. They called an extraordinary general meeting in April and proposed a new slate of directors. They won that vote after years of trying to effect change at the company.

"We had been invested for years and felt that we had exhausted all other avenues in trying to engage with management to stop destroying value," he said. "In a landmark outcome for the company, and for shareholder stewardship in Japan, we are very proud to say that Sun Corp now has a board of directors in place today that are laser focused on improving the business and enhancing value for all stakeholders."

We also asked Fischer about an activist campaign that has proven difficult for them, and he talked about their work with Tokyo Dome at a time when COVID-19 has shut down live events. Tokyo Dome shares plunged as a result, but the team at Oasis Capital Management hasn't given up.

"Not surprisingly, owning a live sporting events venue during a global pandemic became a loser in our portfolio," he told ValueWalk. "But we stayed invested and engaged and encouraged the company to take advantage of the venue closures to push through operational improvements. In late July, Tokyo Dome announced new plans to implement accelerated digitalization for signage and cashless ticketing, as well as improved concessions and new hospitality suites, in line with our proposals. The stock was up over 25% in August. We remain engaged and think this is only the beginning."

This article first appeared on ValueWalk Premium.

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