From a ¥200,000 salary to ¥520 million: Father of two reveals three financial-report rules for picking stocks

Tetsuya went from earning ¥200,000 a month as a junior accountant to holding assets worth ¥520 million. The 43-year-old Japanese investor and father of two says he achieved that growth from an initial ¥10 million without putting in another yen.

His method is built around three rules drawn from company financial reports. First, he looks for a dividend yield of at least 2.5 percent. Second, he wants sales to grow year by year, while ensuring operating profit has not declined for two consecutive periods. Third, he checks that the dividend payout ratio remains below 50 percent, which he believes reduces the risk of future dividend cuts.

Tetsuya describes himself as someone who wants to handle matters efficiently and practically. Rather than spending huge amounts of time examining thousands of stocks, he focuses on narrowing the field quickly. He says the three criteria can help investors screen Japan’s nearly 4,000 listed stocks and find companies the market may have undervalued.

The approach began after an early lesson. At 28, Tetsuya put all ¥10 million into Tokyo Electric Power Company Holdings, expecting a sharp fall to lead eventually to a tenfold gain. He soon recognized the risk of delisting and sold after two or three weeks with almost no loss. He regards the experience as a major turning point in his investment life.

From autumn 2012, he began studying value investing seriously and reviewing other investors’ actual trading records. After marrying and having children, he left his job and became a full-time father in 2014 while continuing to invest. He now holds about 100 Japanese stocks.

Tetsuya says his rules are simple enough for his fifth-grade daughter to use. During a summer research project, she used them to read financial reports and identify a promising stock such as Aso International. He also applies the idea of expected value, borrowed from pachinko, by buying high-profit, low-price-to-earnings value stocks in stages when markets reach extreme lows, sometimes using leverage. Once his target is reached or expected positive news has materialized, he sells decisively.

For Tetsuya, stocks are not collectibles held out of affection. They are a means of supporting his family and improving his life. When the reason for holding a stock has been fulfilled, he says he does not remain attached to it.

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I am a lazy person who just wants to handle things efficiently and practically.