Value Investing in Sanrio vs the Hello Kitty Premium

Sanrio Company, Ltd. (TYO:8136) (OTCMKTS:SNROF) shares have taken a beating the past several months and really got hammered last week — “blame” Goldman Sachs Group Inc (NYSE:GS) for the latter, as it appears that its post-earnings report casting undue pessimism and uncertainty on Sanrio’s business model fueled the selloff and compelled Morgan Stanley (NYSE:MS) -MUFG Securities to publish a copycat note. (Sanrio’s statement emphasizing profit-focus and no plans to abandon lucrative licensing business.) Attracted to Sanrio’s high ROE, a weakening yen, and “Cool Japan” marketing in overseas markets that only solidifies the popularity and brand recognition of flagship character, Hello Kitty, I had the fortunate timing of building a position in Sanrio’s ordinary shares in Q4’12 ahead of a...