Forget the FANGs: The ‘Sunrise’ Stocks Are Doing Better in Japan

  • SoftBank, Nintendo, Recruit, Sony rise average 65% in a year
  • That exceeds a 44% gain by Facebook, Amazon, Netflix, Google

Meet Japan's 'Sunrise' Stocks

Impressed by the so-called FANG shares’ performance over the past year? Japan has a similar group that’s doing even better.

Meet the Sunrise stocks: SoftBank Group Corp., Nintendo Co., Recruit Holdings Co. and Sony Corp. (SNRS, or Sunrise). They’ve risen an average of 65 percent in the 12 months through Friday, versus an average 44 percent gain for the group known as FANG: Facebook Inc., Amazon.com Inc., Netflix Inc. and Google’s parent Alphabet Inc. Japan’s benchmark Topix index added 19 percent in the period.

While both clusters feature members of the new economy, one thing that binds the Sunrise stocks, as some market participants have taken to calling them, is their overseas prospects. Masayoshi Son’s SoftBank, for instance, has been seeking a turnaround at Sprint Corp. in the U.S., Sony has its PlayStation, semiconductor and entertainment businesses, while Nintendo’s Switch console has become a global bestseller. Recruit, perhaps the least known of the group outside Japan, bought a U.S. job site in 2012.

“All four companies had been roiled by lackluster earnings for two or three years,” said Richard Kaye, a portfolio manager at Nippon Comgest Inc. “Their overseas potential had been underestimated until now, but they’re now being reassessed.”

Nintendo’s stock more than doubled over the 12 months through the end of last week, the best performance of the Sunrise stocks, as strong sales of Switch domestically and overseas cheered investors. Recruit surged 59 percent, on bets U.S. online job search engine Indeed Inc. will contribute to profit. SoftBank added 55 percent on signs Sprint’s earnings have bottomed out and on expectations for its $100 billion Vision Fund, while Sony gained 34 percent.

Oasis Management’s Seth Fischer recommended Sony’s shares at the Sohn Conference in Hong Kong last week. Fischer, the chief investment officer of Oasis, said Sony, like the FANGs, was a good investment idea “hiding in plain sight.” He cited the turnaround under Kazuo Hirai, good corporate governance, and strong businesses including home gaming as reasons for suggesting the stock could rise as much as 39 percent.

The Sunrise stocks helped push the Topix above 1,600 earlier this month, a level not seen since 2015. The FANGs, meanwhile, tested U.S. equity bulls on Friday, with each company falling at least 2.8 percent as the Nasdaq 100 posted its biggest drop relative to the Dow Jones Industrial Average since 2008.

The Sunrise shares followed the FANG group lower in Tokyo on Monday, with each of the four Japanese companies sliding at least 1.2 percent. But some investors aren’t too concerned about the technology-stock selloff.

“The FANG shares’ decline is merely a temporary adjustment after they were bought too much,” said Naoki Kanemoto, a Tokyo-based senior fund manager at Sumitomo Mitsui Asset Management Co. “I see the overall uptrend returning.”

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