This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Japan Stocks Too Cheap to Ignore

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By David Sterman

NEW YORK ( StreetAuthority) -- I've been looking at stocks since I was in high school, back in the late 1970s. I eventually chose to turn my fascination with investments into a career. I figured stocks represented the single-best path to wealth creation, thanks to one simple statistic: If you hold an investment for an extended period, then history shows that riskier investments will generate better returns.

This means during any 20-year period going back to the Great Depression, stocks always outperformed bonds, and bonds always outperformed cash. Because I was planning on a 50-year career, I was well prepared for short-term plunges, with the expectation that stocks would make up lost ground -- and then some -- during the subsequent decade.

That axiom still applies here in the U.S. The S&P 500 has more than doubled in value since 1990, even with the gut-wrenching past few years.

But for Japan, that axiom is no longer true.

Home to the world's second-largest economy, Japan has seen its main stock index, the Nikkei, tumble, tumble again and tumble some more during the past 20 years. Take a look.

Frankly, it's hard to see how Japan's Nikkei index will ever revisit the 37,000 mark it reached in 1990 -- at least in our lifetime. It would take an unimaginable 350% upward move. Sure, small but fast-growing markets can generate this kind of gain within a few decades, but Japan is a mature economy with far too many demographic and fiscal headwinds. And yet, for contrarian investors, this market holds some tremendous bargains. These bargains involve companies that are thriving in the global economy, even if their home country's too-strong currency makes life difficult for exporters.

Focus on banks

While most global banks were making loans to debt-addled governments in Europe, Japanese banks steered clear and will not likely need to take write-downs if Europe goes into a deep funk. This is hardly an endorsement for Japanese banks, but they do possess a lot less downside risk than their western counterparts. Meanwhile, they are strikingly cheap by a range of measures.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CAJ $28.08 0.07%
MTU $4.65 0.00%
TM $102.96 0.00%
AAPL $95.03 0.21%
FB $116.73 0.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs