Credit Suisse Group AG is recommending Nippon Telegraph & Telephone Corp., Tokuyama Corp. and Nippon Meat Packers Inc. in its first “focus list” of Japanese stocks.
The list includes nine shares picked from stocks the brokerage expects to outperform the market by at least 10 percent over the next 12 months. The focus-list shares were chosen based on a “contrarian” strategy that considers ratings and profit estimates of other securities companies, Shun Maruyama, a Tokyo-based strategist at Credit Suisse, said in an interview on May 27.
“We acutely feel money flows into Japan are declining, and the reason for Japan’s presence in portfolios is being questioned,” said Maruyama. “These are the shares that we want to recommend wholeheartedly to investors.”
Net purchases of Japanese stocks by foreigners fell for the first three weeks of May, dragging the Nikkei 225 Stock Average to its worst monthly performance since October 2008. The gauge has fallen 7.1 percent this year compared with a 2.3 percent decline by the Standard & Poor’s 500 Index in the U.S. and a 3.9 percent drop by the Stoxx Europe 600 Index.
The Credit Suisse system uses four categories. Stocks in categories one and two are rated “buy,” with those in No. 1 having earnings estimates largely in line and those in No. 2 having wide differences in profit forecasts. Shares in categories three and four are rated “sell,” with wide variation in earnings estimates for No. 3 and in-line estimates for No. 4.
NTT, Meat Packers
Stocks in category one were included for their medium to long-term investment outlook and those in two and three were picked on expectations their earnings will exceed the median estimates, said Maruyama.
Those in category one include Nippon Telegraph & Telephone and Mitsubishi UFG Financial Group Inc. Group two comprises Japan Tobacco Inc., Fanuc Ltd. and Mitsubishi Electric Corp. Category three includes Hitachi Metals Ltd., Nippon Meat Packers, Olympus Corp. and Tokuyama, said Maruyama.
The brokerage’s 12-month price estimates on Nippon Telegraph & Telephone and Nippon Meat are the highest among the analysts tracked by Bloomberg. NTT has risen 2.1 percent this year, while Nippon Meat has gained 4.3 percent, outperforming a 3.2 percent retreat in the benchmark Topix index.