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We are a team of economics professors in the NY area with a passion for financial markets. In our blog "BubbleBustInvesting.com", we write about individual stocks as well as macroeconomics events. We believe that most of the returns in financial markets can be made during the blow and bust of... More
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  • Kubota Corporation: A Good Play in Japan’s Reconstruction 1 comment
    Apr 9, 2011 5:55 PM | about stocks: KUBTY, CAT, DE

    After steering away from the Japanese stock market for almost twenty years, foreign investors are buying Japanese stocks to take advantage of the country’s reconstruction boom that is expected to follow the March 11th earthquake.

    As I discussed in a posting on BubbleBustInvesting.com, investors shouldn’t bet on a robust Japanese recovery. As it was the case in the aftermath of the Kobe earthquake, this disaster isn’t going to change economic fundamentals. Monetary authorities can do very little to stimulate aggregate demand because they are in a dire situation. Thanks to several rounds of quantitative easing both short-term and long-term rates have hovered near zero levels for a prolonged period of time. This means that investors who buy into Japanese stocks now shouldn’t expect a boost from lower rates, and a boost from fiscal policy should be minimal, as money is expected to shift from building bridges to nowhere to repairing bridges to somewhere.

    There is one company, however, that may be benefited even from a minimal boost in infrastructure spending, Kubota Corporation. The company is a manufacturer of a broad array of construction equipment, agricultural, machinery, waste and environmental gear, including iron and plastic pipes and filters, water treatment systems, drainage systems, water supply systems, etc. The company is further expected to benefit from a weakening yen that makes its products more competitive in world markets. Trading at around $46, Kubota’s stock has almost tripled since 2002, while the Nikkei lost almost half of its value. And although its fundamental lag behind those of its US counterparts, reconstruction spending and a weaker yen can reverse fortunes.

    Stock Recent Price Forward PE QoQ Earnings Growth Oper. Margin
    KUB $46 15 58% 9.28%
    CAT 110 13 317 9.38
    DE 97 13 111 13.13

    Disclosure: Long KUB

    Stocks: KUBTY, CAT, DE
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  • tuliptown
    , contributor
    Comments (1561) | Send Message
    you are long cyclicals but afraid that the economy will stall despite Fed efforts. Wouldn't you be bailing from cyclicals if the economy is stalling?
    17 Mar 2013, 11:19 AM Reply Like
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