Goldman Sachs Sees Opportunity in Japanese Stocks After Market Volatility
Despite a recent surge in volatility in Japan’s stock market, Goldman Sachs remains optimistic about the country’s prospects, identifying several opportunities for investors. The bank’s analysts highlighted three Japanese stocks with significant upside potential, adding them to their conviction list. These stocks are listed on the Tokyo Stock Exchange and offer investors the opportunity to invest through American Depository Receipts (ADRs) in the U.S. market.
Key Takeaways:
- Volatility Despite Resurgence: Japan’s stock market experienced a significant downturn in early August, with the Topix and Nikkei indexes suffering their worst declines since 1987. However, despite the initial shock, both indexes have since recovered some of their losses.
- Goldman’s Conviction List: The bank’s analysts have identified three Japanese stocks with strong growth potential, adding them to their conviction list, which features their top buy-rated stock ideas.
- Three Stocks with Significant Upside Potential: These stocks are Asics Corporation, Suntory Beverage & Food, and Hitachi. The analysts anticipate potential upsides of over 40% for these stocks over the next 12 months.
Asics Corporation: A Strong Brand Fuels Growth
Goldman Sachs is particularly bullish on Asics Corporation, a sportswear company known for its performance running shoes, athletic wear, and the Onitsuka Tiger sneaker brand. Analyst Sho Kawano believes that Asics’ profitability will improve, fueled by strong sales in the performance running segment and the spillover effects across their shoe categories.
Asics shares have already experienced impressive growth, rising 99.5% year-to-date. Goldman has set a target price of 3,100 Japanese Yen ($21.07) for the stock, representing a potential upside of approximately 50%.
Suntory Beverage & Food: Focused Growth and Undervaluation
Goldman describes Suntory Beverage & Food as a leading Japanese soft drinks manufacturer with the second-largest market share in Japan. The company also operates in Europe, the U.S., and other parts of the Asia Pacific region.
Analyst Takashi Miyazaki predicts that Suntory’s profits will grow at a compound annual growth rate of 10% over the next three years. This growth trajectory is attributed to the company’s focus on core brands and the recent peak in raw material costs. Miyazaki believes that Suntory’s shares are currently "undervalued." Despite a modest 3.5% year-to-date gain, Goldman has set a target price of 6,900 Japanese Yen for the stock, implying a potential upside of 37%.
Hitachi: Next Phase of Growth
Hitachi, a conglomerate operating in diverse sectors such as power, renewable energy, railway services, and healthcare products, is also featured on Goldman’s list. Analyst Ryo Harada sees Hitachi entering the "next phase" of its growth journey.
Harada believes that the company is poised to benefit from multiple expansion driven by higher corporate value, fueled by earnings per share (EPS) expansion and the growth of its services business. Hitachi’s shares have gained nearly 60% year-to-date and Goldman has set a target price of 4,850 Japanese Yen for the stock, indicating a potential upside of approximately 54%.
Navigating Investment Opportunities in Japan
Goldman Sachs’ optimistic stance on these Japanese stocks signifies their belief in the resilience of the Japanese economy and the potential for growth in specific sectors. Investors looking to diversify their portfolios into the Japanese market may find these stocks particularly attractive, given their potential for substantial gains and their exposure to a variety of sectors. However, it’s crucial to remember that investing carries risks, and potential upsides are not guaranteed.
Before making any investment decisions, thorough research and consultation with financial advisors are strongly recommended. Investors should consider factors such as their risk tolerance, investment goals, and a comprehensive understanding of the Japanese market and its economic outlook before investing in any of the stocks highlighted by Goldman Sachs.
