Focusing on the views of a legendary fund manager, this article explains that Japan has many stocks with strong financials and undervalued share prices. It introduces the three major undervalued sectors benefiting from inflation and representative stocks in each sector.
Some say Japan has numerous bargain-basement stocks whose financials are sound, earnings power and dividends are stable, yet whose share prices are below liquidation value. The Nikkei Average remains above 50,000, but these undervalued stocks are often overlooked.
The three major undervalued sectors identified are financials, resource-related companies and manufacturers. The view presented is that inflation is a tailwind for each sector, making it more likely that earnings and share prices will rise. Many stocks in these sectors are said to offer high dividend yields and low P/E and P/B ratios.
The representative stocks cited are Mitsubishi UFJ Financial Group, Inc. among financials, INPEX among resource-related companies and Mitsubishi Chemical Group Corporation among manufacturers. All are described as undervalued stocks with growth potential. INPEX is considered undervalued, with a PBR of around 1x.
As a method for identifying undervalued stocks, the article highlights a PBR below 1x. After briefly explaining what PBR means, it concludes that a PBR below 1x serves as a useful criterion for identifying many undervalued stocks in Japan.