JAPANESE STOCKS HAVE MIXED POTENTIAL – A PERFECT STOCK-PICKER'S MARKET

Shares of such leading Japanese companies as Sony (NYSE: SNE), Toyota (NYSE: TM), Nippon Telephone (NYSE: NTT) and Mizuho Financial (MFG) are sporting varying potential from a technical perspective. What that equates to in our eyes is a stock-picker's market in Japan (or here in the US using Japanese ADRs). SONY SHARES ARE A GREAT “BUY THE DIP” CANDIDATESony's fundamental tidbits: • SNE sports a 1.2% dividend yield• SNE shares are cheap by several measures:o Price to book ratio of 1.22 o Price to sales ratio of 0.35o Enterprise value of $28.18 billion versus a market capitalization of $24 billion• SNE has mixed balance sheet metrics:o An attractive debt-to-equity ratio of only 34.98%o A not-so-attractive current ratio of 0.90• SNE has negative sales growth estimates and negative EPS estimates for 2015Technically, SNE shares appear to have broken out above the very long-term downtrend line and even appear to have successfully tested the broken downtrend line as new support. Now, technicians believe SNE could continue to rally up towards $27.84 – the 100% Fibonacci price projection line (AKA “correction resistance”). Ideally, they note, buys can be made on a pullback to the recent broken peak at $20.19.TOYOTA SHARES HAVE SOME MORE TO RISE BEFORE A POSSIBLE TUMBLE OCCURSToyota's fundamental tidbits:• Toyota sports a seemingly cheap PE of 11 – but it doesn't seem as cheap when you consider the negative revenue growth estimates for 2015• Toyota does have some cheap valuation metrics, though:o A price to book ratio of 1.47 o A price to sales ratio of 0.87o An enterprise value of $303 billion which trumps the market capitalization of $193.24 billion• Toyota has gross margins of 9.15% which spin off $28 billion in positive operating cash flows annually• Toyota sports a mixed set of balance sheet metrics:o Current ratio of 1.06 – goodo Debt to equity ratio of 108.67% - not so goodThe technical take on TM shares:Technicians note that Toyota shares appear to be in the midst of a short-term corrective move higher (wave “(c) & b”) that should have a ceiling set at no higher than $127.37. Once that level is approached or tested, the technicians believe that a wave “c” move lower may take TM shares all the way down for a test of the $98 to $100 support range.NIPPON TELEPHONE HAS A BIT FURTHER TO FALL BEFORE BECOMING A COMPELLING BUY CANDIDATENippon's fundamental tidbits:• Nippon sports 5.1% net profit margins that spin off over $4.26 billion in positive levered free cash flow annually• Nippon sports clean balance sheet metrics – a debt-to-equity ratio of 38.11% and a current ratio of 1.48• NTT shares are cheap by several metrics:o The price-to-sales ratio is 0.65o The price-to-book ratio is 0.83o The enterprise value of $87.8 billion trumps the stock's market capitalization of $59.9 billion• NTT does sport a PE of just over 10 – which seems somewhat expensive when compared to 2015 estimated growth rates in revenues and EPS of 0% and 4.5% respectivelyThe technical take on NTT shares:Technicians note that NTT stock may be in the final stages of a long-term “abc” downside correction – which shows up clearly on the weekly chart. The downside target for NTT if the current pattern is an “abc” correction (and not something more serious on the downside) is $25.74. Additional support comes into play at the horizontal line at $25.23. OVERALLAt Sea Change, we will be looking at entering SNE and NTT on the long side on pullbacks to support and TM on the short side on a continued rally to resistance. We will be diligently honoring stop losses one point beyond the resistance for the TM short and one point below support for the SNE and NTT longs.