Market Overview

A Portfolio To Profit From Japan's Quantitative Easing

A Portfolio To Profit From Japan's Quantitative Easing

  • Motif Investing constantly looks for “trends, ideas and world events that could create an investment opportunity.”
  • It then picks 10 to 30 related stocks to build portfolios around, weighing them based on their exposure to the coinciding idea, event or trend.
  • Among the site’s market-beating portfolios, investors can find one comprised of U.S. listed securities of Japanese companies that benefit from the quantitative easing (QE) program in place in the country.
  • In the aftermath of the global financial crisis, the U.S. Federal Reserve implemented three rounds of quantitative easing, which Motif assured “helped propel the stock market to record highs as of January 2014.”

    In an effort to fuel its own economy, Japan’s central bank has done the same. The country’s quantitative easing program carried out by Prime Minister Shinzo Abe has reached around101 trillion yen.

    Bring On Inflation

    As Motif explained, “Japan’s QE effort is the equivalent of triple the American endeavor on a comparative GDP basis. Since the program was announced in November 2012, the Nikkei is up almost 75 percent: while labor cash earnings, a benchmark for wages, are projected to increase 0.6 percent in the year starting April 1, 2014.”

    Related Link: Fatten Your Bank Account With This Junk Foods Moderate-Volatility Portfolio

    In addition, the program has impacted the Japanese currency in the desired way. The yen depreciated by almost 30 percent, providing higher returns for U.S.-based investors.

    This motif includes “stocks of Japanese ADRs as well as a currency hedge to protect against the depreciation in the Yen.”

    Performance And Allocation

    The Japan QE motif has managed to beat the S&P 500 both over the past year and past month, returning 13.9 percent and 5.7 percent, respectively, versus the S&P's 0.43 percent decline and 1.34 percent surge over the last year and last month.

    In terms of allocation, 33.1 percent of the portfolio's assets are placed in a currency hedge, 23.7 percent in Japanese technology companies, 22.2 percent in industrials and transportation stocks and 21.0 percent in financial firms.

    As for individual stocks, allocation is as follows:

    • 33.1 percent: Proshares Trust II (NYSE: YCS)
    • 12.7 percent: Toyota Motor Corp (ADR) (NYSE: TM)
    • 8.5 percent: NTT Docomo Inc (ADR) (NYSE: DCM)
    • 7.5 percent: Mitsubishi UFJ Financial Group Inc (ADR) (NYSE: MTU)
    • 7.4 percent: Nippon Telegraph & Telephone Corp (ADR) (NYSE: NTT)
    • 6.7 percent: Honda Motor Co Ltd (ADR) (NYSE: HMC)
    • 5.6 percent: Canon Inc (ADR) (NYSE: CAJ)
    • 5.4 percent: Sumitomo Mitsui Financial Grp, Inc.(ADR) (NYSE: SMFG)
    • 5.3 percent: Mizuho Financial Group Inc. (ADR) (NYSE: MFG)
    • 2.8 percent: Nidec Corporation (ADR) (NYSE: NJ)
    • 2.2 percent: Sony Corp (ADR) (NYSE: SNE)
    • 1.4 percent: ORIX Corporation (ADR) (NYSE: IX)
    • 1.3 percent: Nomura Holdings, Inc. (ADR) (NYSE: NMR)

    Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

    Image Credit: Public Domain


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