Very reassuringly for me, big global investors are using the latest Earthquake to buy big in Japan.
One was BlackRock, the world's largest money manager. Says Bob Doll, chief equity strategist: "Tactically, Japan's rally is likely to continue. If the nuclear question marks weren't what they were, the Japanese market would be
rallying far more significantly. Clearly no one has 100% confidence, but
the risk-reward says you want to own more today than a week ago."
Another buyer was Pimco, which snapped up Japanese ETFs for its Pimco Global
Multi-Asset Fund (PGMAX).
Look at history. In the weeks after Japan's 1995 Kobe earthquake, stocks
fell by a quarter, but then bounced back in a matter of months. After the
2001 bombing of the World Trade Center, U.S. stocks fell 11.6%, before
rebounding 19.4% over the next six months.
The average stock in Japan is selling now for 13.9 times its annual profit.
Japanese stocks haven't been this cheap since the financial crisis. More remarkable, current stock prices value Japanese companies at just under book value,or assets less intangibles and liabilities. By contrast, stocks in the U.S. and China sell for twice book.
Even before the tsunami, Japan was looking cheap. The recent slide means
that some of the best companies in the world are available at
unheard-of-prices. These stocks are likely to rebound 10% over the next few
months. Among the most attractive are a raft of powerhouse brands: Sony (ticker:
SNE) and Canon (CAJ); Toyota Motor (TM) and Nissan (NSANY); cosmetics
company Shiseido (SSDOY); telecom powers KDDI (9433.Japan) and Nippon
Telegraph & Telephone (NTT); trading titans Mitsubishi (MSBHY), Sumitomo
(8053.Japan) and Itochu (8001.Japan); and steel giants JFE Holdings
(5411.Japan) and Nippon Steel (5401.Japan).
Yes, the human loss is unfathomable. And yes, Japan's economy is almost
certain to slow this year. But the slowdown is likely to be only temporary,
with healthy growth forecast for next year as the country rebuilds.
(Source: Barrons)
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