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January was a short month for stock trading in Japan due to all the holidays, but it sure felt long at times. A chart below contains January returns for Japan ADRs. You'll find some interesting thinly traded names leading the pack.

Kubota (KUB) and Makita (OTCPK:MKTAY) both gained more than 10% in January (13.9% and 13.8%, respectively). Congratulations if you are a shareholder -- not bad for one month! The combined average trading volume over the past 3-months for these two stocks is less than 30k.

Anyway, it turned out to be a tougher month than expected for the bluest of blue chips, such as Toyota (NYSE:TM) -1.9%, Honda (NYSE:HMC) -0.5% and Canon (NYSE:CAJ) -6.8%. Canon reported more record earnings, but forecast slower growth. Honda had a decent quarter, but missed analysts' estimates -- although it did raise its fiscal year forecast. There's only so much a stock can go up before there's some profit taking. Toyota reports Tuesday.

Click to enlarge image


Jan-07-Japan-ADR-perform

Three stocks were hit pretty hard that I am watching: Trend Micro (TMIC) -7.0%, Konami (NYSE:KNM) -11.6% and Advantest (NYSE:ATE) -12.5%.

I don't know what's going on with Trend. It's now at a new 52-week low. Who knows if this is the bottom, but it's hard to imagine it going any lower. It could be that institutional investors are waiting for quarterly earnings (I haven't been able to confirm the earnings release date).

Konami reports on Tuesday. It seems it has a lot going for it with the success so far at Nintendo and the weak yen. It trades at a much more attractive P/E valuation compared to rival gaming software co's in the U.S. The one reason I can think of behind the selling is its ~50% calendar year '06 gain, and thus what is now about a 12% pullback from its 52-week high.

Advantest has already reported (click here for a summary) and granted it was ugly, management promised a turnaround from next fiscal year beginning this April. I expect it to test its 52-week low, which it trades about 7% above as of Friday's close. I am not sure it goes much lower because it forecast double-digit sales and profits. The corporate world's transition to Vista and the need for hardware upgrades will likely support and eventually propel this stock.

Disclosure: The author owns shares of IIJ and NIS Group.

Source: Japan ADR Performance in January