January 7, 2014 7:00 pm JST

Toyota, Hitachi stocks tipped for stellar 2014

TOKYO -- Toyota Motor and Hitachi are seen as the most promising Japanese stocks of 2014, according to a Nikkei Veritas survey of market experts conducted at the end of December.

     Toyota will likely benefit from the yen's depreciation and the U.S. economic recovery, while Hitachi is expected to continue enjoying strong earnings thanks to its infrastructure business.

     Japanese retailers and service-oriented companies are drawing especially close attention from market experts, who see such businesses getting a boost from the domestic recovery. Also attracting interest are companies that are pursuing growth through mergers and acquisitions and other means.

     One person who is positive about the prospects for Hitachi's stock is Norihiro Fujito, head of investment information at Mitsubishi UFJ Morgan Stanley Securities. He predicts overseas demand for the company's products will grow because of Hitachi's heavy focus on the infrastructure business, which has a broad consumer base.


 Hitachi has been restructuring, withdrawing from the flat panel business while enhancing its rolling stock and information systems operations. Toshio Sumitani, head of the investment research department at Tokai Tokyo Research Center, said the company has shifted to a growth mode.

Wheels of fortune     

Toyota, meanwhile, will focus on improving its profitability by cutting costs. Its overseas profitability is enjoying a boost from the yen's fall.

     The automaker expects its group operating profit for the year ending March 2014 to jump 67% on the year to 2.2 trillion yen ($20.8 billion). But market participants are generally saying the figure will be higher. Mitsushige Akino, executive director at Ichiyoshi Asset Management, expects Toyota to top the record 2.27 trillion yen profit it logged in fiscal 2007. He also says the carmaker's earnings will continue growing in the year through March 2015 thanks to solid earnings in North America and the yen's depreciation.

     Market experts also expect good things for the stock of Mazda Motor and Fuji Heavy Industries. Shares in Fuji Heavy, the company behind the Subaru brand, soared nearly 200% in 2013. Its earnings in the U.S. are widely expected to continue expanding, thanks in part to the release of new models.

     Also tapped for growth are domestic demand-focused companies whose earnings are being driven by unique business models. One such company is Kakaku.com. It is known for its various online services, including its Tabelog restaurant review site. Solid earnings are expected for the year ending March 2014, with the company's profit seen climbing for the eighth straight year.

     Ship Healthcare Holdings is also being singled out as a choice stock pick for 2014. Earnings at the health-care products company are expected to rise for the sixth straight fiscal year. Shoichi Arisawa, deputy manager at IwaiCosmo Securities, said the company will benefit from government efforts to promote exports of health-care infrastructure.

On the hunt     

Other promising stock picks are companies pursuing growth through M&As. For example, telecommunications company SoftBank has been acquiring overseas mobile carriers. Kazuhiro Miyake, chief strategist at Daiwa Securities, said the company's stock is a potential star performer that can gain extra momentum if the overall stock market maintains its upward trajectory.

     In December 2013, major retail group Seven & i Holdings announced acquisitions of and capital and business tie-ups with four companies, including large online retailer Nissen Holdings. Kazuhiro Noda, president at DZH Financial Research, said the company will probably increase and diversify its sales channels and step up its takeover activity.

     Travel agency H.I.S. is also being eyed as a strong stock for 2014. The company made theme park operator Huis Ten Bosch a subsidiary in April 2010. It has been logging solid earnings from the unit's theme park in Nagasaki Prefecture. Tetsuro Miyachi, senior general manager of the Japanese equity investment department at Okasan Securities, said H.I.S.'s travel operations based outside Japan can expect higher earnings.

     As for what kind of profit growth the experts expect to see in fiscal 2014, nearly 60% of those surveyed said combined group pretax profits at listed companies will rise 10-19% on the year. That is smaller than the 30% rise widely expected for fiscal 2013. About 30% of the respondents expect a growth rate of less than 10% for next fiscal year.

     Widely shared concerns cited in the survey include the possibility that the yen may not be able to continue weakening as quickly as it did in the previous year. Also cited was the worry that the coming consumption tax hike in April will hurt earnings.