Japan Crisis May Lift U.S. Chip and Auto Makers

by: HiddenLevers

By now articles have been written ad nauseam about whether Japan's unfolding nuclear crisis has created opportunities in the nuclear energy sector, and on how to play a reconstruction bounce in Japan. In fact, we at HiddenLevers have covered some great recovery plays as well.

I'd like to take a look now at a different angle - what major U.S. domestic stocks might benefit from the unfortunate events befalling their competition in Japan? Perhaps it sounds sinister, but the media has begun covering supply chain disruptions arising as a result of temporarily reduced Japanese economic activity. Who will step in to fill the gaps?

Consumer Electronics:

While little in the way of direct consumer electronics is made by U.S. companies anymore, major U.S. semiconductor players still produce the guts of these devices. With companies like NEC, Hitachi (HIT), Fujitsu (OTCPK:FJTSY), and Toshiba (OTCPK:TOSBF) almost certain to suffer production outages, chip prices may rebound and help these players. Note that some of the U.S. companies [including Texas Instruments (NYSE:TI) in the chart below] have themselves had plants impacted by the Japanese tragedies, but these impacts will be relatively small in comparison.

(Chart created using Hidden Levers app)

Intel (NASDAQ:INTC), TI, and Broadcom (BRCM) are all catching the uptrend caused by a rebound in sales of consumer electronics and other technology products. If component prices rise due to supply limitations, this could further strengthen their profits.

U.S. Auto Industry:

Ford (NYSE:F) and GM (NYSE:GM) [and Chrysler(DCX)] may benefit from the temporary shutdown of the Japanese auto industry. It's likely that Japanese auto production may be reduced for some time to come as the country attempts to get electrical production and other key infrastructure back in order. GM in particular may benefit, as its stock has proven to be more highly correlated with U.S. auto sales than Ford, according to HiddenLevers analysis.

(Chart created using Hidden Levers app)

U.S. auto sales have seen a strong uptrend from the recession lows, and are up almost 20% over the last year. Domestic automakers might even catch a double break if the crisis decreases foreign competition while simultaneously lowering oil demand and thus oil prices (Japan is the world's #3 oil consumer).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.