The Japanese stock market has been surging this year, with the Nikkei 225 index up more than 22%. These are gains comparable to the tech-heavy Nasdaq 100. Unlike the Nasdaq 100 or even the S&P 500, the Japanese market still seems incredibly underpriced.
Indeed, Japan’s economy has been in a tough place for such an extended period. But now that it’s making new highs again after decades of stumbling en route to recovery, I view the market as very compelling for value investors seeking underappreciated growth and international diversification.
Undoubtedly, 2024 marks a historic year for the Nikkei 225. Now that it’s eyeing higher highs, thanks to strength in a broad range of names, perhaps it’s time to give some names a look.
These three Japanese stocks still look to be on sale, even after their strong year-to-date rallies. Further, they could have more gas in the tank to surge even higher in the second half.
Ryohin Keikaku (RYKKY)
Let’s start the list with a stock you’ve probably never heard of but may have done business with. Ryohin Keikaku (OTCMKTS:RYKKY) is the firm behind Japanese retailer Muji. The store sells minimalist (and sometimes innovative) consumer products that function quite well. Indeed, the Japanese aesthetic is perhaps the biggest draw to Muji’s international stores.
Shares of RYKKY have been hurting in recent years but have more recently begun to sustain a recovery, now up 65% in the past year alone. Indeed, Muji sells discretionary goods, ranging from clothing to diffusers and even furnishings. This makes it vulnerable to shifts in consumer spending. Amid inflation, the consumer has undoubtedly felt enough of a pinch to cut back on various goods.
As Ryojin Keikaku continues expanding internationally (most notably to Europe) while bolstering its digital presence, the company seems positioned to boom as global consumer spending recovers.
Sony (SONY)
Sony (NYSE:SONY) is a better-known Japanese firm that is behind popular branded electronics (think flatscreen televisions) and entertainment offerings.
Over the past two and a half years, SONY stock has been a roller coaster. Still down around 33% from its all-time high, shares of the behemoth trade at with a trailing price-to-earnings ratio of 17.6, making it an intriguing value play.
It’s rare to get such a mix of entertainment (gadgets, music, film, and video games) from one stock. As a diversified behemoth with a massive library of assets, Sony should be that one stock to put on your watchlist if you could only buy one Japanese stock—also, the name trades on the New York Stock Exchange, making it an easy purchase for U.S. investors.
Moving ahead, Sony Pictures may pull the trigger on a major media acquisition. Whether it’s Paramount (NASDAQ:PARA) or rival, though, remains to be seen.
Softbank (SFTBY)
Speaking of diversified Japanese giants, we have Softbank (OTCMKTS:SFTBY), a software juggernaut that has major investments in several technological innovators. Lately, Softbank has leaned more heavily towards artificial intelligence investments. The new AI focus has garnered much enthusiasm, with shares up more 51% in 2024.
Most recently, Softbank announced its Vision Fund 2 will invest $10 million to $20 million in Perplexity AI, a U.S. AI search firm that hopes to rival Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and its Google Search product.
Indeed, it’s a rather small bet in a firm valued at around $3 billion, but one that gives the Japanese giant skin in the game of a credible AI-leveraging industry disruptor. I’m a big fan of the Perplexity investment and think Softbank could easily up its stake if the AI search firm can make meaningful strides over Google.
On the date of publication, Joey Frenette held a LONG position in GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
