Japanese stocks are pushing to the upside after the country’s ruling coalition led by Prime Minister Shigeru Ishiba failed to secure a parliamentary majority in elections 2024.
The Liberal Democratic Party (LDP) together with Komeito – its coalition partner won 215 seats out of 465 in total, falling short of 233 it needed to earn a majority.
LDP will now have to form a new coalition with a third party that spells uncertainty as the name of the party as well as the terms of such an agreement with it are yet to revealed.
“That could potentially make for a very murky outcome going forward,” Neuberger Berman’s senior vice president Kei Okamura told CNBC on Tuesday.
Nonetheless, Okamura is bullish on the following two “high-quality” Japanese stocks.
USS Co Ltd (TYO: 4732)
Kei Okamura remains constructive on shares of the used car dealer even though they have been a laggard in 2024.
The portfolio manager expects USS stock to recover in the coming year as it’s currently the “biggest operator” in the second-hand car auction market with a share of more than 50%.
The company, therefore, has exceptional “pricing power – which we think is absolutely critical,” he added on “Squawk Box Asia”.
USS Co Ltd ended its fiscal 2024 with ¥48,937 million ($326 million) in operating profit on ¥97,606 million in net sales. Both figures were up meaningfully versus a year ago.
USS shares also currently pay a healthy dividend yield of 2.94% that makes up for another good reason to have it in your portfolio.
Tokio Marine Holdings Inc (TYO: 8766)
Shares of this insurance company are already up some 60% versus the start of 2024 but Neuberger Berman is confident that it will push further to the upside in the months ahead.
In fact, Kei Okamura sees Tokio Marine stock as somewhat insulated from the political uncertainties. He’s positive on the multinational as it has a commendable footprint in both Japan and the United States that’s helping improve its P&L.
“We’re expecting the insurer to continue to unwind across shareholdings, invest those proceeds into business, but al buy back stock. That would bode well for the balance sheet,” as per the investment firm.
Tokio shares are well-positioned for healthy total returns as they pay a dividend yield of 2.21% as well. A few of the other high-quality names that Neuberger Berman is bullish on include Hitachi and Mitsubishi Logistics.
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