By James Dennin for Kapitall.
The Nikkei 225
only barely outperformed bitcoin
in 2014 so far, through the end of May.
This most well known index of Japanese stocks has lost
about 10.18%, rivalling the fraught digital currency and the
Argentinian peso for worst-performing asset worldwide.
So, naturally, we decided to look for discounts.
The Japanese stock market has already started to rebound some,
supported by a weak yen
Throughout Tuesday the index climbed about 1%, also in part due
to strong Chinese manufacturing. Still, there is a lot of ground to
cover in the 10% loss. In our screen for discounted Japanese stocks
we wanted to look for a few things.
We wanted blue chip stocks-companies with established and
familiar reputations with investors-that paid a dividend. We also
wanted to make sure that the stock looked relatively cheap for
stocks with little momentum.
This meant narrowing our screen to Japanese stocks on American
exchanges with a market cap of $10 billion or more.
We then looked for high ratios of
levered free cash flow to enterprise value
. Levered-free cash is the amount of money a compnay has after
paying off its debts and costs. Enterprise value is another way of
measuring a company's size.
When a company has a high ratio of levered-free cash to
enterprise value, it might be said to be undervalued. This screen
left us with two stocks.
Click on the interactive chart to view data over
1. Canon Inc.
): Canon, Inc., through its subsidiaries, manufactures and sells
network digital multifunction devices (MFDs), plain paper copying
machines, laser printers, inkjet printers, cameras, and lithography
equipments primarily under Canon brand in the Americas, Europe,
Asia and Oceania. Market cap at $43.74B, most recent closing price
Levered free cash flow at $3.01B vs. enterprise value at $28.75B
(implies a LFCF/EV ratio at 10.47%).
2. Sony Corporation
): Designs, develops, manufactures, and sells electronic equipment,
instruments, and devices for consumer, professional, and industrial
markets worldwide. Market cap at $16.7B, most recent closing price
Levered free cash flow at $3.40B vs. enterprise value at $21.51B
(implies a LFCF/EV ratio at 15.81%).
(List compiled by James Dennin. Monthly returns sourced from
Zacks Investment Research, LFCF sourced from Yahoo! Finance. All
other data sourced from Finviz.)
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