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6 Japan Stocks, ETFs to Watch

Kubota is expected to grow earnings by 13% in fiscal 2012 (note that in Japan the fiscal year will end in March). With a shortage of machinery likely to occur because of increasing demand, Kubota is going to see earnings grow by at least 20% in fiscal 2012 to at least $3.10 per share. The stock should exceed its recent peak price of $55 and rise to above $60.

Another Japanese company that will benefit from the rebuild in Japan that is also traded in ADR form is Kyocera (KYO), a diversified electronics company. In its consumer products division, Kyocera produces a wide variety of products such as wireless phone, kitchen utensils and stationery. Its larger business-to-business segment focuses on industrial and commercial products such as information and telecommunications equipment medical and dental devices, ceramics, electronics and semiconductor components, LED lighting, automotive components, lenses, cutting tools and chemicals. In addition, Kyocera produces solar power-generation systems for commercial and residential use. Kyocera clearly has a full array of products that will be necessary for the reconstruction of Japan.

Kyocera, like Kubota, will experience better than the expected 6% earnings growth that analysts currently expect for 2012. The stock sells at a discount to the market multiple, which for a company of Kyocera's size and quality is not enough. As a result, Kyocera could rise to at least $125 within the next year. I would also mention that Kyocera has an excellent balance sheet with nearly $5.3 billion of net cash and short-term investments as of the end of its 2010 fiscal year. That is nearly a third of the company's market capitalization.

A third Japanese ADR that comes to mind is Hitachi (HIT), which is primarily known as a consumer electronics company. Many homes and buildings will be built or repaired in Japan requiring home appliance and electronics. More important, Hitachi also engages in producing a large line of commercial and industrial products. In this business segment, Hitachi offers information technology solutions; electronic devices; industrial chemicals and materials; cabling; public and urban transportation systems, logistics and instrumentation; medical, health care and life sciences machinery; and environmental, power and industrial systems and equipment. Hitachi is uniquely positioned to benefit from both the commercial and residential rebuilding which will take place.

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