Japanese markets have risen steadily so far this week, and one bottom-up investor sees the potential for further gains. “When we look at Japan, it’s hard not to be bullish on equities. Because even companies that are struggling on the earnings side are going to have their valuations depressed, and even if earnings are weak, the stock price probably won’t fall that much,” Kato Miio Capital Said the founder of marketing company LightStream Research. “When we look at the valuations of many companies, they look ridiculously cheap,” he added. In an interview with CNBC Pro on October 29, Kato pointed out that Japan is going through a period of “normalization” due to a rebound in domestic consumption, an increase in the number of tourists, better wage growth, increased confidence among the wealthy population, and more competitive exports. “I think this is very positive for the economy and underpins the possibility that the stock market will perform extremely well – as opposed to the lackluster economic outlook a decade ago,” Kato explained, noting that improving macroeconomic conditions have benefited businesses. , many companies have better pricing power and stronger profitability. Kato’s comments came as news that Prime Minister Shigeru Ishiba’s ruling coalition failed to secure a parliamentary majority in Japan’s elections put Japanese markets in the spotlight. Japan’s benchmark Nikkei 225 closed 0.77% higher at 38,903.68 points on Tuesday, extending gains following the weekend’s election results. The Topix rose 0.91% to 2,682.02 points. Overall, the Nikkei 225 index, which includes the top 225 companies on the Tokyo Stock Exchange, is up nearly 16.25% since the beginning of the year, while the Topix is ​​up about 12.8%. Department Store One of the market segments Kato is optimistic about in Japan is department stores. He explained that such stores are patronized by middle- and high-income earners in the country who have higher spending power. One stock that stood out to him was Takashimaya. Kato described the chain, which sells products such as clothing, electronics and home furnishings, as “one of the biggest beneficiaries of middle- and high-income spending.” His optimism about department stores is interesting because many department stores “haven’t expanded in about 30 years.” He pointed out that several stores have “shrunk” and closed stores with poor customer traffic. Still, Kato sees long-term potential given strong domestic support. “Growing domestic demand is now complementing higher inbound demand from tourists into the sector. So overall, department stores are looking quite interesting,” he added. He also emphasized that the gradual retirement of older workers with higher wages bodes well for the company. Such employees make up about two-thirds of the company’s workforce, reducing the company’s selling, general and administrative costs and providing “operating leverage on the bottom line as (consumer) spending grows.” Food and Beverage Bets Another theme Kato focuses on is food and beverages, which can benefit disproportionately from price increases because of their lower margins. He noted that these rate hikes could boost operating profits if costs remain unchanged. “We expect most companies in the sector to beat their guidance and consensus ratings,” he added, naming fast-food chain Yoshinoya Holdings among his top picks. The company’s profitability has “improved significantly” following recent price increases. The company is currently deepening its presence in Southeast Asia, China and the United States. “Recovering from pressure from abroad.” Kato is “relatively positive” about the auto industry, in addition to its more consumer-focused industries. The investor called the sector “extremely cheap” and noted that concerns about a U.S. recession and the potential appreciation of the currently cheap yen against the dollar may have deterred investors from piling into the sector. Even so, Kato thinks auto stocks are attractively valued. The one name that stood out to him was Toyota. The investor stressed that unlike rivals Nissan and Honda, the company is “extremely competitive” and able to withstand pressure from China’s shift to electric vehicles. “Toyota is in a very good position – I think their bet on a balanced approach to hybrids, plug-in hybrids, electric vehicles and fuel cells is starting to pay off as many countries are now realizing the full potential of Difficulty.
Bottom-up investors designate investable industries | Real Time Headlines
RELATED ARTICLES