Hedge fund managers highlighted investment opportunities across Japanese equities at the inaugural Sohn Tokyo Investment Conference, as corporate governance reforms and profitability attract renewed investor interest, according to a report by Bloomberg.

The event, held on 16 October, brought together prominent hedge fund managers pitching stocks they believe offer significant upside, against a backdrop of growing enthusiasm for Japanese equities following record market highs earlier this year.

Hideki Kinuhata, chief investment officer at Silq Capital, identified machine-tool manufacturer Makino Milling Machine as an attractive investment following its successful resistance to takeover attempts. Kinuhata expects earnings to increase 80% over the three years to March 2028, supported by growing aerospace demand across commercial aviation, defence and satellites.

Software companies also featured prominently. Japan Catalyst portfolio manager Riho Yokozawa highlighted accounting software provider OBIC Business Consultants, forecasting revenue growth of approximately 80% over the coming years, supported by pricing power despite concerns over artificial intelligence disruption.

Marc Wallach, partner and portfolio manager at Ruane Cunniff, backed financial software developer Money Forward, arguing that the Japanese market offers favourable conditions for software profitability. Wallach sees potential for operating margins to reach 30%, with annual earnings growth of up to 25%.

Meanwhile, Masaki Gotoh, chief investment officer at TriVista Capital, identified Harmonic Drive Systems as a beneficiary of growing demand for humanoid robotics and physical AI, citing its established position in precision components used in industrial robots.

Several managers also pitched opportunities outside Japan. Change Global Investment founder Thea Jamison argued that Indonesian telecommunications group PT Telkom Indonesia offers approximately 90% upside, despite a sharp selloff in Indonesian equities following an MSCI warning over the country's emerging-market classification.

Eduardo Marques, chief investment officer at Pertento Partners, expressed a bullish view on South Korea's Hanwha Corp and its aerospace business, projecting potential upside of 100% amid rising global defence spending. He took a bearish stance on battery materials manufacturers Ecopro and Ecopro BM, citing stretched valuations, declining profitability, debt burdens and excess capacity.

In Japan's financial sector, Polymer Capital Management portfolio manager Daisuke Nakayama backed Orix Corp, arguing that its shift towards generating earnings through third-party capital and leverage could support stronger growth and a higher valuation multiple.

Blue Orca Capital chief investment officer Soren Aandahl identified Rohm, Chubu Electric Power and TRE Holdings as potential beneficiaries of their indirect stakes in Toshiba. He argued that a future Toshiba IPO could generate substantial gains relative to the companies' market capitalisations, following the conglomerate's operational turnaround.

Activist investing was another focus of the conference. Oasis Management founder Seth Fischer renewed his campaign against Japanese drugstore operator Kusuri no Aoki Holdings, where he has spent several years challenging the founding family's influence.

Fischer said he would continue pressing the company for explanations surrounding stock options issued to members of the Aoki family, highlighting the continued role of shareholder activism in Japan's evolving corporate governance landscape.

The range of pitches reflected hedge funds' growing focus on Japan, where corporate reforms, improved shareholder returns and opportunities to unlock undervalued assets continue to attract global investment managers.