Three stocks to profit from corporate Japan’s cash piles

Japanese companies have been piling up cash, but investors have been discounting its value. Here, professional investor Joe Bauernfreund highlights three stocks that can unlock it.

Our Japan strategy takes advantage of a phenomenon unique to Japan: excess cash on balance sheets. An impressive 56% of companies in the Topix index (a broad benchmark containing around 2,000 stocks) have net cash. For the MSCI Europe and S&P 500 indices, the respective figures are just 23% and 16%.

After years of seeing corporate Japan building up cash piles and neglecting shareholders, investors have applied a deep discount to cash, assuming that it will never be used productively. As a result we can find wonderful companies trading at remarkably low valuations.

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Joe Bauernfreund

Joe Bauernfreund is chief executive officer and chief investment officer of Asset Value Investors. He is the manager of AVI Global Trust and AVI Japan Opportunity Trust.