America’s Billionaires Love Japanese Stocks. Why Don’t the Japanese? - Kanebridge News
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America’s Billionaires Love Japanese Stocks. Why Don’t the Japanese?

Japan’s government wants cash-hoarding households to invest more

By AKANE OTANI
Mon, Sep 25, 2023 8:56amGrey Clock 3 min

TOKYO—Japan’s government is on a mission to make buying stocks hot again.

Many of America’s biggest investors are bullish on Japan. Warren Buffett shared that he increased his investments in Japanese companies during an April visit to the country. Ken Griffin is preparing to reopen an office in Tokyo for his hedge fund, Citadel, and investment banks Goldman Sachs and Morgan Stanley have issued optimistic outlooks for Japan’s stock market.

Japan’s problem is this: There are few signs its estimated 125 million residents share in the excitement.

Burned by dismal returns since the bursting of Japan’s asset bubble in the late 1980s and early 1990s, generations of families here have stashed most of their money in low-yielding savings accounts rather than trying to increase their wealth through the stock market.

Japanese households put an average of just 11% of their savings into stocks and 54% in cash and bank deposits, according to Bank of Japan data released last month. That trails well behind the U.S., where households have about 39% of their money tied up in the market and only 13% in cash and bank deposits, according to Federal Reserve data.

Haruyo Arai, a 62-year-old office worker, began investing in the stock market just last month.

“I was brought up by parents who would say, ‘Don’t dabble in stocks,’ ” she said.

Japanese Prime Minister Fumio Kishida has pledged to double households’ asset incomes, in part by encouraging people to invest in risky assets like stocks. The government is raising caps for Japan’s tax-exempt investment system for small investors, the Nippon Individual Savings Account, with changes set to take effect in January. The Tokyo Stock Exchange has been urging companies to boost their valuations and increase shareholder returns.

Arai cited the upcoming expansion to NISA, along with a desire to save more money for the future, as some of the reasons she decided to begin taking investing more seriously. She has been taking weekend classes at Tokyo-based Financial Academy to learn more about stocks and waking up early every morning to watch a TV news program focused on the economy.

Some believe investors like Arai will prove to be the exception, not the rule. Stocks here haven’t hit a record in decades. There isn’t much buzz among ordinary people about investing in Japanese markets.

“I’ve got the impression that Japanese people don’t really think positively about the desire to make money,” said Takashi Kawaguchi, a 48-year-old office worker who, like Arai, has been learning about investing at Financial Academy.

While the 2023 rally has helped lift Japanese stock indexes to 33-year highs, long-term returns pale in comparison to what an investor would have gotten by investing in U.S. stocks. The Nikkei closed at 32,402 on Friday, still 17% below its record hit in 1989. The S&P 500 has grown more than twelvefold over that time. That has made many investors here turn to foreign markets instead of focusing their bets within Japan.

“The Nikkei might hit 40,000, god knows when,” said Heihachiro “Hutch” Okamoto, foreign equity consultant at retail brokerage Monex. “But most of our investors prefer U.S. stocks.”

To Okamoto’s point, the most popular names traded on Monex daily aren’t Japanese stock indexes like the Topix or Nikkei, brand-name companies like Sony or even the “sogo shosha”—the trading houses that Buffett has invested in. Instead, they are all American names: companies like Nvidia, Tesla, Apple and Amazon.com, as well as funds tracking the S&P 500 and the Nasdaq-100.

And that is just among those interested in investing in the first place. While in past years, everyday investors in Japan made a name for themselves with their forays into the foreign exchange market, the overall trading culture here has been one of hesitation.

“Most people here think investing is very risky,” said Hidekazu Ishida, a special adviser at FinCity.Tokyo, which works with the government and the financial industry to try to boost investment in Tokyo. Being into finance comes off as “kakkowarui,” he added, referencing a word for uncool.

Even some heads of companies are lukewarm about the idea of encouraging more individual investors to buy Japanese stocks.

“I’m neutral about that,” said Takeshi Niinami, chief executive officer of whisky and beverage giant Suntory, when asked if he thought it would be a good idea for more Japanese people to invest in the market. Stock investing is risky, he said. And many Japanese people remain wary of participating in the market, because of the severity of prior downturns.

“I think perhaps increasing interest rates is better for people,” he said.

—Chieko Tsuneoka and Alastair Gale contributed to this article



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To Find Winning Stocks, Investors Often Focus on the Laggards. They Shouldn’t.
By KEN SHREVE 12/06/2024

These stocks are getting hit for a reason. Instead, focus on stocks that show ‘relative strength.’ Here’s how.

By KEN SHREVE
Wed, Jun 12, 2024 4 min

A lot of investors get stock-picking wrong before they even get started: Instead of targeting the top-performing stocks in the market, they focus on the laggards—widely known companies that look as if they are on sale after a period of stock-price weakness.

But these weak performers usually are going down for good reasons, such as for deteriorating sales and earnings, market-share losses or mutual-fund managers who are unwinding positions.

Decades of Investor’s Business Daily research shows these aren’t the stocks that tend to become stock-market leaders. The stocks that reward investors with handsome gains for months or years are more often  already  the strongest price performers, usually because of outstanding earnings and sales growth and increasing fund ownership.

Of course, many investors already chase performance and pour money into winning stocks. So how can a discerning investor find the winning stocks that have more room to run?

Enter “relative strength”—the notion that strength begets more strength. Relative strength measures stocks’ recent performance relative to the overall market. Investing in stocks with high relative strength means going with the winners, rather than picking stocks in hopes of a rebound. Why bet on a last-place team when you can wager on the leader?

One of the easiest ways to identify the strongest price performers is with IBD’s Relative Strength Rating. Ranked on a scale of 1-99, a stock with an RS rating of 99 has outperformed 99% of all stocks based on 12-month price performance.

How to use the metric

To capitalise on relative strength, an investor’s search should be focused on stocks with RS ratings of at least 80.

But beware: While the goal is to buy stocks that are performing better than the overall market, stocks with the highest RS ratings aren’t  always  the best to buy. No doubt, some stocks extend rallies for years. But others will be too far into their price run-up and ready to start a longer-term price decline.

Thus, there is a limit to chasing performance. To avoid this pitfall, investors should focus on stocks that have strong relative strength but have seen a moderate price decline and are just coming out of weeks or months of trading within a limited range. This range will vary by stock, but IBD research shows that most good trading patterns can show declines of up to one-third.

Here, a relative strength line on a chart may be helpful for confirming an RS rating’s buy signal. Offered on some stock-charting tools, including IBD’s, the line is a way to visualise relative strength by comparing a stock’s price performance relative to the movement of the S&P 500 or other benchmark.

When the line is sloping upward, it means the stock is outperforming the benchmark. When it is sloping downward, the stock is lagging behind the benchmark. One reason the RS line is helpful is that the line can rise even when a stock price is falling, meaning its value is falling at a slower pace than the benchmark.

A case study

The value of relative strength could be seen in Google parent Alphabet in January 2020, when its RS rating was 89 before it started a 10-month run when the stock rose 64%. Meta Platforms ’ RS rating was 96 before the Facebook parent hit new highs in March 2023 and ran up 65% in four months. Abercrombie & Fitch , one of 2023’s best-performing stocks, had a 94 rating before it soared 342% in nine months starting in June 2023.

Those stocks weren’t flukes. In a study of the biggest stock-market winners from the early 1950s through 2008, the average RS rating of the best performers before they began their major price runs was 87.

To see relative strength in action, consider Nvidia . The chip stock was an established leader, having shot up 365% from its October 2022 low to its high of $504.48 in late August 2023.

But then it spent the next four months rangebound—giving up some ground, then gaining some back. Through this period, shares held between $392.30 and the August peak, declining no more than 22% from top to bottom.

On Jan. 8, Nvidia broke out of its trading range to new highs. The previous session, Nvidia’s RS rating was 97. And that week, the stock’s relative strength line hit new highs. The catalyst: Investors cheered the company’s update on its latest advancements in artificial intelligence.

Nvidia then rose 16% on Feb. 22 after the company said earnings for the January-ended quarter soared 486% year over year to $5.16 a share. Revenue more than tripled to $22.1 billion. It also significantly raised its earnings and revenue guidance for the quarter that was to end in April. In all, Nvidia climbed 89% from Jan. 5 to its March 7 close.

And the stock has continued to run up, surging past $1,000 a share in late May after the company exceeded that guidance for the April-ended quarter and delivered record revenue of $26 billion and record net profit of $14.88 billion.

Ken Shreve  is a senior markets writer at Investor’s Business Daily. Follow him on X  @IBD_KShreve  for more stock-market analysis and insights, or contact him at  ken.shreve@investors.com .