Top 10 Japanese stocks in 2021

The Japanese stock market saw a remarkable rally in 2020 with the Nikkei 225 gaining almost 25%. This has prompted foreign investors to seriously consider investing in the country’s stocks. Warren Buffet, who’s been largely under the radar during the pandemic, placed a $6bn bet on Japanese stocks in September 2020. The country’s handling of the COVID19 pandemic and rally in technology stocks pushed the market up.

The stay at home life brought on by COVID19, boosted revenue and potential for a lot of online retailers, game makers and medical science innovators. We believe that this trend will continue well into 2021 even after the COVID19 restrictions ease and this can be a huge positive for Japanese tech stocks.

Below are what we think are the Top 10 Japanese tech stocks in 2021.

M3 Inc.

M3 Inc. was Japan’s best-performing blue chip stock on the Nikkei 225 in 2020. The stock gained 195% during the year on the back of a 124% surge in 2019; since its listing in 2004 the stock has grown by 64x. The company is an online healthcare provider involved in telemedicine and drug marketing. The company has nearly 80% of Japan’s doctors on subscription.

M3 reported yearly revenue of USD 1.2 bn in March 2020. The stay at home trend has really boosted revenues for the company with the demand for online heath growing. The company has also been venturing into other areas, with its drug-marketing platform increasing 2.5 times in the quarter ended in June.

We believe that the stock will carry its strong performance in to 2021.

Nexon Co Ltd

The video game maker Nexon got a surprise induction in the Nikkei 225 and saw its share price surge by almost 119% over the year. The company produces games aimed at its domestic market but also at the Chinese and Korean markets. While growth in China has been flat, the company has shown robust growth at home and in Korea.

The company has a market cap of 2,819bn JPY; its operating profit grew by 13% YoY to reach 27.6bn JPY. 

The release of Mobile Dungeons and Fighters game in China and the release of the company’s first title in US and European markets can push Nexon’s share price higher in 2021.

Mercari Inc.

Mercari Inc is an exceptionally rare Japanese unicorn which went public in June 2018. It is an e-commerce company that operates a C2C marketplace app which is Japan’s answer to Ebay.

The company sees its US expansion as its top priority and it is the largest C2C player in Japan. Mercari Inc. is also the largest stock on the Mothers index with a market capitalization of 718bn JPY; the share price grew by 105% in 2020. Stay at home demand during the pandemic has helped the company achieve higher customer engagement and acquisition.

Despite a threat of competition in the US, we believe that growth in Japan will help drive revenues and profits along with Mercari’s share price in 2021.

CyberAgent Inc

Cyber Agent is a diversified company with many business interests in the online space. The company runs a video-streaming service AMEBA, a digital advertising agency, a video-game production company and a forex trading website. Cyber Agent has been anther beneficiary of the stay at home trend and saw its share price increase by 86% in 2020.

The company has a market cap of 898bn JPY and is part of the TOPIX index. The company is another Japanese tech company to look out for as new gaming hits and reviving online advertising business can help grow revenues in 2021.

SoftBank Group Corp

The Softbank Group Corp. is a tech conglomerate famous for its technology focused VC fund “Vision Fund” and its founder Masayoshi Son. The company’s share price increased by almost 68% during the year. SoftBank is planning to buy back 2.5tn JPY of its shares, of which almost half have been completed.

The company also plans to reduce its debt that has been a sore for investors. 

To achieve this, Softback is planning to sell almost 10trn JPY worth of assets. It has already achieved nearly half of this target through the sale of its holdings in TMobile, Alibaba, and Softbank Corp (its domestic telecom company). Further IPOs of Vision Fund’s portfolio companies and rumors of Masayoshi Son taking the company private could drive the share price higher in 2021.

Nintendo

The famous video game console maker’s stock price soared by 54% during 2020 as video games gained more popularity during the pandemic. The company ended 2020 with a market cap of 8,667bn JPY; its last fiscal year’s Net Income was 211bn JPY. Nintendo launched “Animal Crossing: New Horizons” in March 2020 and the game was a huge hit during the global COVID19 lockdowns.

We believe that Nintendo Switch’s potential and the company’s ventures in other digital sectors can drive share price in 2021.

MedPeer Inc

Like M3 Inc., MedPeer is another online health service that has seen its demand grows during COVID19.

The stock price has grown in tandem by almost 4.5x in 2020. The company has two segments: the first is its Doctor Platform business which is Medpeer’s doctors-only community website through which the company provides support services for doctors and medical professionals.

The second is the company’s Healthcare Solutions segment, which provides healthcare support for consumers, including health promotion and disease prevention.

Both these segments have a lot of potential and we believe MedPeer is definitely a stock to look out for in 2020.

Rakuten Inc

Rakuten is an online retailer with interest in diversified digital businesses. The company’s core business is its e-commerce marketplace “Rakuten Ichiba”, it also operates Rakuten Mobile (mobile network provider), online financial services such as Rakuten Bank, Rakuten Securities and Rakuten Card. The company also provides angel investments to early-stage tech startups.

Rakuten’s MNO service faced headwinds in 2020 and the share closed the year flat (reaching a high of 1,243 JPY during the year). But given that Rakuten Ichiba saw a 40% increase in sales over 2020, the stock has a lot of potential to grow hence it makes our top 10 list.

BASE Inc

BASE, Inc. offers services such as application development that allows users to create their own online shops, online payment development, and various other online services throughout Japan. The company’s stock price grew by almost 5.9x in 2020 and we believe that this momentum could continue well into 2021. BASE Inc has a market cap of 214bn JPY.

Demae-Can Co

Demae-Can Co. is another beneficiary of the Japanese tech stocks rally in 2020 as the company’s share price rallied 3x. The company is an all-round delivery service the range from food and mail to laundry. We believe that the euphoria around the company will carry its stock through 2021. The company has a market cap of 268bn JPY.

References

https://www.bloomberg.com/news/articles/2020-12-29/these-are-the-winners-and-losers-in-japan-s-2020-stock-market

https://www.bloomberg.com/quote/2484:JP

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