Harris Associates' CIO: Why I only hold one Japanese company and am avoiding EMs

Governance improving but too slowly

David Herro, CIO and manager of the Global Concentrated OEIC at Natixis affiliate Harris Associates, has said the only reason he currently holds just one Japanese stock is because companies continue to sit on free cash instead of re-investing in their businesses.

Although the country had been improving over the last few years, the CIO said it was not nearly enough to warrant investing in companies as many management teams viewed foreign investments as their cash and not the investors'.  His one investment, Toyota, had started to increase pay-outs and do some buybacks however, Herro had to knock-off half of the firm's $60bn balance sheet as he knew it would never be re-invested. Should investors avoid Japan because of its weak economy? "Japan is like a turtle," he said. "It is a perfect example of the differentiation between low price and hi...