Japan has seen no end of troubles in the last year as natural disasters and stagnant growth have weighed on the Nikkei stock index, which finished out 2011 at its lowest level since 1982. Even bottom feeders have had a hard time finding a reason to buy Japanese equities.
But some contrarian investors like portfolio manager Josh Strauss (left) of the Appleseed Fund are waking up to the fact that “the cheapest stock market in the world that everybody hates,” as Strauss calls Japan, is presenting some great buying opportunities.
“Historically, the investment case for avoiding the Japanese market has merit, but these negatives are well priced into the Japanese stock market and then some, in our opinion,” Strauss told AdvisorOne on Monday. “We own some Japanese companies that are trading below the cash on their balance sheet.”
The negatives of the Japan story are clear, Strauss conceded: last year’s earthquake and tsunami, stagnant growth, demographic pressures from an aging population, and the Japanese tendency to under-invest in stocks while overinvesting in savings accounts earning close to 0%.
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Appleseed has a 100% hedge on its yen position through the futures markets, so it is long Japanese stocks but short the currency. The yen is at a nine-month low against the dollar, which is supporting Japanese exporters.