Three Japanese growth stocks – MoneyWeek

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InourJupiterJapanIncomeportfolio,wearefocusingonthestrengthofthedomesticeconomy,ratherthanonexporters。

Firmsthatrelyondomesticdemandshouldbenefitfromtheimprovinglabourandpropertymarkets。

Moreover,consumerspending,whichhadbeenthemaindragontheeconomy,recoveredunexpectedlyinthefirstquarterof2007,whichindicatesthatconsumersmaybebecomingmoreoptimistic–albeitcautiously。

OurportfoliohasalargepositioninTDHoldings(8795),theonlylistedlifeassurerinJapan,createdbythemergerofTaiyoLifeandDaidoLifein2004。

EarningsbeathopesfortheyearendedMarch2007,helpedbystronger-than-anticipatedgrowthininvestmentincomeonthebackofrisingdividendsfromitsequityholdings。

Inthecurrentyear,IexpectTDtobenefitfromhigherinvestmentincomefromitsbondholdings。

I’malsopositiveaboutEastJapanRailway(9020),aformerJapanNationalRailwaysspin-off。

ItoperatestherailnetworkintheTokyometropolitanandsurroundingareasanddevelopsandmanagesretailandofficepropertiesonitslandholdingsnearitsrailways。

EarningsgrowthforEastJapanfortheyearended31Marchwasbetterthanexpected,supportedbyrisingsalesatitscoretransportunitandcostcuts。

WithTokyo’seconomyandlandpricespickingup,thecompanyshouldbenefitfromincreasedeconomicactivityinitsoperationalterritory。

AmongmyfavouredsmallerfirmsisJapanGeneral(8878),ahomebuilderbasedinKanagawa,whichisadjacenttoTokyoandincludesresidentialcitiessuchasYokohamaandKamakura。

ThecompanyhasanumberofdevelopmentprojectsinthepipelinetotakeadvantageofarobustrecoveryinJapan’spropertymarket。

Landpricesbegantoriseinmostareasin2006andofficerentscontinuetogoupintheTokyometropolitanarea。

IbelieveJapanGeneralwillachievestrongearningsgrowththisyearandnext。

ThestocksSimonSomervillelikes

Stock,12mthhigh,12mthlow,Now

TDHoldings,JP¥9,390,JP¥7,450,JP¥8,680EasternJapanRailway,JP¥1,010,000,JP¥75,000,JP¥935,000JapanGeneral,JP¥3,600,JP¥2,115,JP¥2,780

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