Seeking Alpha: Itochu Management's Unrealistic Goals Look Like A Real Obstacle

For some time now I had been thinking that Itochu (OTCPK:ITOCY) was a good value play on sector (Japanese trading companies) that is often overlooked as hopelessly unwieldy and uncommitted to shareholder value creation. In particular, I liked Itochu for its relatively lower exposure to natural resources (at least compared to Mitsui, Marubeni, and Mitsubishi) and its determination to pursue leadership positions in textiles, manufacturing, retailing, and food, with a particular focus on China.

This looks like I case where I should have gone with the conventional wisdom. While Itochu is indeed one of the most China-leveraged Japanese trading companies, I am concerned about the declines in earnings quality, management's strategic investment decisions, and their apparently unrealistic views concerning many aspects of the business. While the local shares have been quite strong over the past year (up more than 30%; while currency has reduced the gains to ADR shareholders to below 10%), and there is upside if Itochu can consistently deliver double-digit ROEs, I think it is time to call it a day with a company where I just can't share management's views on the best path forward.

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Itochu Management's Unrealistic Goals Look Like A Real Obstacle