Three of corporate Japan’s hidden gems to buy now
Professional investor Nicholas Price of the Fidelity Japan Trust picks three of his favourite Japanese stocks that he thinks the market has overlooked.
The pandemic continues to pose near-term risks as new variants of the virus and rising infection rates prompt governments to extend restrictions. However, vaccines and continued monetary and fiscal-policy stimulus bode well for global growth and will be supportive of Japanese equities. Several themes present themselves. Clean energy and environmental-efficiency are areas where Japan has some very competitive companies. Covid-19 has also accelerated trends in e-commerce and digitalisation. As profits recover, companies will prioritise those areas.
Above all, Japan continues to offer a wealth of under-researched mid- and small-cap growth companies, where we typically find better business models and returns on equity (a key gauge of profitability), and management has more incentives in terms of shareholder returns. Active managers like myself, based here in Japan, get the opportunity not only to invest in established global leaders but also to unearth less well-known companies, where lower levels of coverage by analysts can often yield great mispriced opportunities.
NOF: delivering drugs and profits
NOF (Tokyo: 4403) is a diversified chemicals company with strong positions in many niche markets, resulting in stable growth and high profitability. Its core businesses include surfactants (inputs for toiletries and cosmetics) and drug-delivery system (DDS) products, which ensure that a drug’s active ingredient is delivered and absorbed safely in the right part of the body.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
DDS is a crucial component in mRNA technology (a new form of cancer treatment and also the basis of the Pfizer and Moderna vaccines) and other new treatments, and growth in this field benefits NOF as the market leader. While the stock is often overlooked, this is slowly changing as we successfully engage with the company’s new president to improve the group’s environmental, social and governance and disclosure policies.
Mitsui High-tec: motor-core expert powers ahead
Mitsui High-tec (Tokyo: 6966) comprises almost 70% of the global motor-core market, an essential component of power-train motors in electric and hybrid vehicles. The company’s strength lies in its ultra-precision machining and die technology, which is used to create high-quality motor cores and machine tools. Mitsui High-tec is a dominant supplier and it aims to expand its motor-core production capacity sixfold through 2030, a clear sign of confidence in its order backlog. Yet with a market capitalisation of only £1bn and little coverage, this is a name with significant upside potential.
Coconala: an online freelancers’ market
Coconala (Tokyo: 4176) is a unique online freelancing platform that enables users to trade knowledge, skills and experience. We first invested in the company in 2019, when it was unlisted, recognising it as a beneficiary of the many structural changes occurring in Japan’s labour market; we were attracted by its high and sustainable growth rates as well as the high operating leverage of its business.
Coconala recently had a strong debut on the Tokyo Stock Exchange and the value of the our holding increased more than threefold. The success of this investment highlights the benefits of our research on the ground and efforts to find the most attractive opportunities in corporate Japan.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Nicholas Price, Fidelity Japanese Values
-
The best properties for sale for around £500,000
Properties for sale for around £500k – from a Grade II-listed former rectory in County Durham to an early 19th-century chateau in southwest France.
By Natasha Langan Published
-
M&S recovery has momentum: will it stick?
After years of decline, M&S seems to have turned a corner. But is this just a “dead cat bounce”?
By Dr Matthew Partridge Published
-
Small caps: how to ride the recovery wave of UK equities
Professional investor Ken Wotton highlights British small caps that hit the sweet spot of the British equity market
By Ken Wotton Published
-
0DTE options: should you bet on America's favourite?
Zero-days-to-expiration (0DTE) options are popular with US traders seeking high leverage, but consistent profits by betting on short-term market direction are slim
By Theo Casey Published
-
Investing in defence: the easiest way to buy into the boom
The defence sector has taken off, but the opportunities for stock picking are more limited. We explain what to buy
By Frederic Guirinec Published
-
The investment opportunities in a bear market
As equities fell sharply in August, Max King explores the investment opportunities in a bear market
By Max King Published
-
How to invest in Web 3.0
Here are three core holdings at the forefront of Web 3.0 development that could shape the next era of the internet, according to Chanchal Samadder, head of product at ETC Group
By Chanchal Samadder Published
-
How investors can cash in on undersea cables
Undersea cables are in demand as the renewable energy boom has sparked a race to rewire the world
By Rupert Hargreaves Published
-
Relx outperforms: should you buy this FTSE 100 success story?
Relx, a fast-growing risk management and analytics group is benefiting from artificial intelligence
By Dr Mike Tubbs Published
-
UK stocks have become a global favourite – should you invest?
The world is taking to UK stocks – but how long will it last?
By Alex Rankine Published