What You Need to Know Before Buying Nintendo Stock

Nintendo (NTDOY -0.33%) may own some of the most recognizable intellectual property in video games, but the stock is not as closely followed as its American peers. That's at least partly because the company trades on Japanese stock exchanges.

But that doesn't mean U.S. investors are out of luck -- even if they're not willing to trade on a foreign exchange. Here's a look at how you can become a Nintendo investor and what resources are available to learn more about its business.

A full transcript follows the video.

This video was recorded on Oct. 16, 2018.

Vincent Shen: We're going to the Industry Focus mailbag today for this episode. This discussion is actually long, long overdue.

Dan Kline: Do we have a graphic for that, where a mailbag comes across the screen?

Shen: I wish. I'll look into that with our producers. One of our listeners, Matt, reached out to us over the summer, asking about Nintendo. We did not forget you, Matty. The last time Nintendo came up on the show, it was a really brief update on the strong early reception and sales performance for the company's latest console, the Switch. This was maybe spring of 2017. Matt's write up to us is a little too long to quote here on the show in its entirety, but basically, he wanted to know why video game competitors like Activision Blizzard, Take-Two Interactive, and Electronic Arts, typically get the most attention in terms of the gaming and e-sport companies, even though Nintendo has plenty of its own strengths, which we'll get into.

Matt, we're going to look at Nintendo's business, some of the latest developments. But to start, it's worth noting that Nintendo is a Japanese company. They're headquartered in Kyoto. The stock trades on exchanges in Tokyo and Osaka. Listeners based in the U.S. who prefer to avoid trading on foreign exchanges, which is possible, but I think daunting to most individual investors, you'll have to rely on the American depository receipts, or ADRs. For Nintendo, those ADRs go by the tickers NTDOY and NTDOF. That first one, NTDOY, sees significantly more trading volume, with hundreds of thousands of shares trading hands most days. Eight of those ADRs represent one ordinary share of Nintendo's stock on its home exchange.

Going back to Matt's question, a big reason why I think you don't see Nintendo included in as many stock recommendations for video game exposure is that fact that I think a lot of investors feel uncomfortable trading pink sheet or over the counter ADRs like these shares. Nintendo is not required to report the full detailed financial and business information to the Securities and Exchange Commission as a result. While I can go to the SEC's EDGAR search tool and pull up the Activision, EA 10-K or 10-Q filings, that's not the case for Nintendo, though they do offer a lot of pretty solid reporting on their investor relationship website.

Kline: There's also no earnings call. You lose a lot of the color that you get from questions. You get the straight reporting -- the top sales, the titles, the year over year. But you don't get, what are your plans? Are you thinking about making a Super Mario Brothers movie again? So, some things that might get them news stories in a traditional cycle on another company don't come up for Nintendo.

Shen: Yep. As you can imagine, that lack of reporting, it's going to give a lot of individual investors some second thoughts before they take a position. But this is a pretty storied, over $40 billion company. I think it deserves more investor attention, and that's why we'll get into the company, its business, and the rest of the discussion. They're enjoying quite the tailwind right now.