Within the Japanese equity market, there are many companies with the potential for high profitability - specifically, stocks with an ROE of 12% or more. These Japanese companies feature ROEs at levels similar to constituents of the US's S&P 500. However, even so, these Japanese companies are traded at a discount.
Comparison of High ROE Stocks
*1 Of the S&P 500 constituent stocks as of end of Dec. 2023, the 469 stocks for which the most recent year of ROE was available via FactSet.
*2 Out of the Prime Market's constituents of 1,422 stocks for which one year of ROE was available via FactSet for the one year period ending Dec. 2023.
Source: Prepared by Nomura Asset Management based on FactSet data
Though not at the same proportion of the U.S. market's S&P 500, one in four TSE Prime Market-listed companies have the potential for high profitability. (Please refer to the notes above for calculation methods.)
However, even within this select group, many of the stocks stand at discounted valuations that represent attractive opportunities for investors.
PER Trends for High ROE Stocks in the US/Japan
Period: 1993 - 2024, annual, as of the end of December. For 2024, as of the end of February 2024.
TSE Prime Market-listed companies (up to 2020, TOPIX-listed companies)
Source: Prepared by Nomura Asset Management based on FactSet data
The above is historical data and does not indicate nor guarantee future investment results.
In order to bridge this gap in awareness, NAM will promote the appeal of Japanese equities to investors around the world through both informational campaigns and our fundamentals-focused Japanese equity strategies.
Engagement (Dialogue with Portfolio Companies)
A deep understanding of investee companies and their business environment is the starting point of constructive dialogue. Through these activities, NAM seeks to improve both the social value and economic value of the companies within our portfolios.
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