Nintendo is one of those brand names that are familiar to every American. But its business operations are less well known, possibly because it counts its profit in Japanese yen rather than U.S. dollars.
Those profits are considerable in any currency. After a few tough years, a new game console, the Nintendo Switch, transformed into a superhero for the company. Its net income, in U.S. dollars, grew from $146 million in 2016, before the Switch was introduced, to more than $1.7 billion in 2019. By March 2020, Nintendo's market cap stood at about $47.8 billion.
- Nintendo stock trades on the Tokyo and Osaka exchanges.
- U.S. investors can buy Nintendo ADRs over-the-counter.
- NTDOY and NTDOF are the ticker symbols for the two Nintendo ADRs.
Those kinds of numbers may make American investors wonder how they can invest in Nintendo short of traveling to Tokyo or Osaka, where its stock trades. In fact, there are a couple of ways that they can get their hands on Nintendo stock.
American Depositary Receipts
U.S. investors can acquire Nintendo stock by buying American Depositary Receipts (ADR), which are traded on U.S. stock markets.
ADRs are hardly as well known as stocks, although they've been around since 1927. A single ADR may represent one share, a number of shares, or a fraction of a share in a foreign corporation. That is, one ADR may contain 10 foreign shares or one-tenth of a foreign share.
ADRs are administered by banks or brokerages and are sold to investors who want to hold interests in foreign corporations in order to diversify their portfolios while avoiding some of the costs, bureaucracy, and taxes associated with directly holding stock in foreign companies.
U.S. investors can purchase a Nintendo ADR traded over the counter (OTC) with the ticker symbol NTDOY. One NTDOY ADR represents one-eighth of a Nintendo share traded in Japan. Thus, a U.S. investor needs to acquire eight units of NTDOY to equal one ordinary share of Nintendo.
Another Nintendo ADR trades over the counter in the U.S. using the ticker symbol NTDOF. One NTDOF ADR equals one ordinary share of Nintendo traded in Japan.
One NTDOY ADR represents one-eighth of a Nintendo share, while one NTDOF ADR equals one share of Nintendo.
U.S. investors need to keep in mind the exchange rate between the U.S. dollar and the Japanese yen when purchasing Nintendo ADRs. As of March 20, 2020, one U.S. dollar equaled 110.97 Japanese yen.
At an exchange rate of 100 yen for every U.S. dollar, for example, NTDOF would trade at roughly $200 per share if one share of Nintendo is trading in Japan for 20,000 yen.
As NTDOY is one-eighth of an ordinary share, it trades at roughly one-eighth of NTDOF. So, if NTDOF is trading at $200, then NTDOY trades at about $25.
NTDOY Vs. NTDOF
When choosing between NTDOY and NTDOF, investors must consider the volume of shares traded in both of these ADRs.
The volume of trading in a stock or an ADR is important because it affects its liquidity. The more Nintendo ADRs that are traded, the higher the likelihood that the spread between the buy and ask bids for the ADRs is smaller.
The Volume Issue
NTDOY commands a higher volume of trading than NTDOF, with hundreds of thousands of NTDOY ADRs trading daily compared to thousands for NTDOF. With fewer shares trading hands, the movements in the price of the ADR may be greater.
The ability to add to or reduce a stake once it is acquired is another consideration for U.S. investors when deciding between NTDOY or NTDOF. Because NTDOY represents only one-eighth of a share, investors in it can more easily add to or subtract from their Nintendo interests.