I have worked all weekend on the building of my 30 stocks portfolio. To make things easier for my readers,
especially individual investors, all the stocks in my portfolio are included in the Nikkei 225. As a result my performance will not be biased as if I invested in small cap stocks, given the
high probability to have return of more than 100% in 2009 after the big plunge those stocks had over the past 2 years in Japan. In the table below you will find the 30 stocks with their weigh in my portfolio as well as their Beta (source Bloomberg) vs. the
Topix. I wish I had the Beta vs. the Nikkei225 but Bloomberg only provides for free on its site the stock's Beta vs. the Topix.
I believe, like many fund managers and economists, we have entered a long recession period. Many people are comparing today's environment with the one of the Great Depression of the
1930's. In today's recession, there are definitely some similarities with the Great Depression but I believe central bankers and governments reacted
strongly to prevent many years of deflation. However, all these measures are only going to stop our economies from falling too far but in no case, at least for 2009, we will see
a strong recovery of world economies. Banks are still not lending, there is a lack of balance sheet transparency and there might be more negative surprises ahead for financial
institutions worldwide. The de-leveraging process in the financial sector will probably take another year or two before things go back to normal.I would like to see the level of banks' lending go back to more normal level before considering a recovery of our economies. As a result, I am convinced 2009 will be another
difficult year as companies will have difficulties to raise money from banks to invest in new project or acquire new businesses.
However, equity markets do not fall straight down and investors always try to see the
light at the end of the tunnel when there is nothing to see. In every bear market there are upward movements of 15-25%. The bear market
of 2000-2002 is a good example of that. I believe we are entering such rally right now. One of the reasons for such rally is the optimism coming from the investiture of Barack Obama
as President of the United States and the adoption of big stimulus packages everywhere in the world, from China to the United States. Investors are
hoping right now for a recovery of the economy in the second of half of '09 given the size of the stimulus packages. As a result, today, many stocks are
very attractive in term of valuation and could be bought heavily over the next few weeks.
I strongly believe stock markets are going to enjoy a rally at the beginning of
2009. My portfolio reflects this view and that is why you will find many cyclical stocks included in my portfolio. My portfolio Beta is well above 1 and I neglected most defensive
sectors like Utilities, Food or Telecom. Each stock I pick as an interesting story, apart from Honda and Nissan, which could help them over perform their peers and the Nikkei225.
These companies are global and/or domestic leaders like Komatsu, Daikin, Toshiba or Daiwa House and should be considered more attractive for that reason to
investors. Right now, it is important to understand that size matters. The bigger the company, the more chance you have to see it survive the crisis and I chose my stocks
following that rule.
So here it is, my first portfolio for 2009. In the future, every time I want to
buy or sell a stock in my portfolio I will give you an update on my performance. If I don't make any change for a month, I will still provide you with an update on my performance and my
opinion of the market.
As I am working on building my portfolio of 30 stocks, I want to give you a reason to be bullish on equities for the beginning
of 2009. I would describe myself as a Portfolio Manager with a Top-Down approach with some stock picking ideas based on GARP (Growth At Reasonable Price). However, my years at Refco
Trading Services are still weighing on me and I am also very much looking at Technical Analysis to find entry and exit points for stocks.
I believe it is important for me to show you, before you start looking at my portfolio, why for the next couple weeks I see
a rebound in equity markets that could bring us to 1050 on the S&P500 and about 10000 on the Nikkei 225. In the
charts below you will find that first the Nikkei has been faster to rebound than the S&P500 or the CAC40. However, today, graphically the S&P500 and the CAC40 are looking for a
stronger rebound in the next couple weeks. Both indexes jumped above their MM50 today. Both move are very sharp, which indicates that the movement is just begining. On top of
that when you look at the technical indicators, you can see that the MACD is about to turn positive, the RSI and the Stochastics are on the upside without being overbought. When looking at
the weekly charts, wich gives a long term view of the market's direction, it is even more bullish as both the MACD and Stochastics just crossed on the upside. The only concern I have is the
low volume of the past couple days, which show that there might be only few sellers in the market and, therefore explain the sharp upward move.
On the other hand the Nikkei is already well passed its MM50 and the MACD is already positive. The Stochastic looks
overbought while the RSI is still rising but well the 30 level. However, the weekly chart is giving us a more bullish picture as its MACD and Stochastics crossed on the upside couple weeks
ago and are still moving up, which indicates that the upward move is not finished yet. As you can see on the
Nikkei225 chart, the main resistance of the bearish trends is well off the high of today and should give some breathing air to Bull investors and Traders in the next couple weeks.
It is off course just a simple example on how I look at charts when making a investment decision. I would emphasize
that it is very important not only to look at daily charts but also weekly and monthly charts. The daily chart helps you to enter a stock quickly but only weekly and monthly chart can
provide you with enough insurance that the upside or downside is here for a long time. In the recent months, many investros got trapped into false upward move that only lasted a day or
two. If they had looked at a weekly chart they would have been able to stay away those stocks.
The Tokyo Stock Exchange has long been a forgotten stock market. For years, since the japanese asset and real estate bubble of the 1990's, investors have been disapointed when
investing inJapan. The
japanese economy faced a long period of deflation, which caused the main stock market index, the Nikkei 225, to tumble from almost 40000 in 1989 to 9000 in 2003. The foreign investors
fled away fromJapanto
reallocate their assets in more lucrative market like the S&P500, the Dax or the Footsie.
The Nikkei225 recovery in 2003 to 2007 was driven by companies linked to the comodities and the automobile bubbles, which is the main reason why the Japanese stock market could not
resist from the global sell off of equities. in 2007 and 2008. These, so called, cyclical stocks lost more than 60% in couple months and there are still a lot of concern about their capabilities
to recover in the next few months given the pessimistic expectations world leaders have on a recovery of the world economy in 2009.
However, I believe the rebirth of the japanese stock market will come from its domestic economy . The government, like many other in the world, is going to spend billions of dollars
to stimulate its economy. One point investors should keep in mind is that the financial crisis has not impacted japanese banks the way it has with european and american financial
institutions. The restriction put upon japanese banks during the 1990's by the government prevented them to invest in toxics assets like the subprime. I believe japanese banks will be willing to
lend more to japanese companies than its peers inEuropeand theUnited States. As a result japanese companies will recover faster from this economic downturn and that makes them very attractive today for any equity
investors.
My goal, here, is to help you have a better understanding of the Nikkei 225 and the japanese companies that are included in that equity index. I will provide you with weekly and
monthly report of the japanese stock market starting onJanuary 1st, 2009. You will be able to follow the track record of my personal portfolio compare to the Nikkei 225 as well as to read my on point on individual
stocks where I will provide you with my view on the fundamentals and a technical analysis of the selected stocks.
I am passionate about Japan and more particularly about investing in Japan. From 2006 to 2008 I managed a Large Cap Japanese Equity Fund at Groupama AM. I invest in stocks based on a GARP strategy and a mix of top-down and bottom-up approaches
