Recovery Stock #3 – Toshiba (TOSBF)
Toshiba Corp. (OTC: TOSBF) is even more of a nuclear stock than Hitachi. The company took over the old Westinghouse nuclear unit and is a major power in the world nuclear field, in addition to being a high-technology conglomerate. Both Hitachi and Toshiba are involved in trying to resolve the situation as both have supplied equipment for the nuclear plant.
While I can see how investors would want to stay away from nuclear stocks, you have to keep in mind that Japan has no fossil fuel deposits, so nuclear power remains the most viable option for the country. I think that both Hitachi and Toshiba will learn from the mistakes in Fukushima and build better plants in the future; no one could have predicted such a strong earthquake. And it was not the reactors themselves that started this, but the supporting cooling equipment that failed.
Recovery Stock #4 – Makita (MKTAY)
Makita Corp. (NASDAQ: MKTAY) makes power tools for professional users worldwide. Approximately 83% of Makita’s sales are outside of Japan, so the hit to the company’s operations will be small. But the remaining 17% should see a nice boost in the year ahead. Rotary hammers, hammer drills, demolition hammers and grinders are just what Japan needs at present.
This is a relatively small company with a market cap of just under $6 billion, so any reconstruction boom should be easily felt on the bottom line. Before the disaster, revenues were already growing at 12% a year, while earnings grew 27% over the past year. The shares were under pressure, along with the Japanese stock market, even though the company’s sales are relatively safe, and in the next year, the boost should be notable.
Recovery Stock #5 – Mitsui (MITSY)
Mitsui & Co., Ltd. (NASDAQ: MITSY) is an old Japanese trading house. The company procures goods and services for other industrial customers in Japan and around the world, and is categorized under “distribution services,” even though there isn’t a U.S. equivalent to its type of business.
The company has eight distinct business groups: iron and steel products, mineral and metal resources, machinery and infrastructure projects, chemicals, energy, foods and retail, consumer services and IT, and logistics and financial markets.
Given how it is closely intertwined in the Japanese business world, I expect it to benefit tremendously from the reconstruction effort. The shares trade at only seven times earnings because its margins are thin based on its distributor model, but that should not discourage you from considering this recovery stock.