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Possibly the Greatest Investing Value I've Ever SeenBy
Wednesday, March 23, 2011
A sector of the Japanese stock market "is one of the greatest investing values I have ever seen in my investing lifetime, if not THE best value," I told paid-up subscribers of my True Wealth newsletter last week.
Over the weekend, the richest investor in the world agreed with me... Warren Buffett said he's bullish on Japan:
It will take some time to rebuild, but it will not change the economic future of Japan... Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don't think Japan will be an exception.
Buffett has been around the investing block once or twice. He knows the brutal reality of Wall Street...
Whether it's an earthquake or a city-destroying hurricane or a tsunami that could end up causing a nuclear disaster, the truth on Wall Street is brutal... If the disaster doesn't drastically damage the wheels of commerce in the entire nation, the financial markets move on – quickly.
The failure of Lehman Brothers, one of the largest U.S. investment banks? That kicked off a financial catastrophe in the U.S. and around the world. But a tsunami in Indonesia that killed 230,000? It didn't even dent the Indonesian market, which went on to hit new highs a few days later.
It's been over a week, and the video footage out of Japan is still just as shocking and heartbreaking as it was on the first day. But as horrible as the situation is – it's like Katrina mixed with the Indonesian tsunami mixed with Three Mile Island – the way the financial markets see it, Japan's situation ain't no failure of Lehman Brothers.
As best I can understand it, the worst-case scenario from this point forward is a large swath of Japanese land will be essentially uninhabitable. But the business of the rest of Japan will go on... just as businesses from Arizona to Maine went on after 9/11 or the Three Mile Island accident.
After the earthquake, Japanese stocks lost a quarter of their value over a couple days. Even now, after the market has regained its footing, it's still cheap...
The table here shows that for major Japanese companies to trade in line with major U.S. companies, they'd have to rise over 100%. Take a look:
Stock Market Value Comparison
Obviously, many investors fled Japan. They sold on the bad news. Me? I'm incredibly optimistic on Japanese stocks at this point...
When you look at the big picture, you see this is a moment like March 2009 in the U.S. It's a moment to step up and buy. A moment to be bold.
U.S. stocks doubled from their March 2009 lows. Japanese stocks could do much better than that... Hundreds of percent gains are possible. People have given up on Japanese stocks, more so than any other developed country I've seen in my entire career.
Japanese stocks are record-cheap. It's time to buy.
Good investing,
Steve
Further Reading:
"Even with the devastation in Japan," Steve still believes Japanese stocks have "has the potential to turn out to be a fantastic investment." Check out a must-see chart and read more about this opportunity here: On the Ground in Japan.
A little-known hedge fund manager tripled his money last year by investing in Japanese stocks. Read more here: Curtis Freeze Made 210% Last Year Doing This: You Can Too.
Market NotesANOTHER GREAT INCOME OPPORTUNITY For the contrarians out there, the "big cheap tech" idea is getting attractive again...
Back in September, we sounded a loud alarm that dominant tech companies like Intel and Microsoft were sporting super-cheap valuations, held enormous cash piles, and were carving out tradable bottoms. We pointed out how these companies aren't in their hypergrowth stages anymore, so many growth-obsessed investors have dumped the stocks.
Soon after our write-up, these stocks rallied along with the market. One of value guru Dan Ferris' favorite cheap stocks, Microsoft, enjoyed a rally off its floor in the $24 area to $28.50. But the market selloff of the past few weeks has taken Microsoft and other "big cheap tech" players back near the levels of seven months ago... where big money institutions find value, buy shares, and support prices.
For the "option minded" folks out there, this is another opportunity to generate income with covered calls or selling puts. Make sure to read this archived essay from our sister site Growth Stock Wire for more on this opportunity.
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