5 sectors and hot stocks for the first half of 2024
Entering 2024, the Nikkei Stock Average rose, mainly semiconductor stocks, and broke through 38,915 yen set in 1989, and there was also a scene where it reached the 40,000 yen range for the first time in history in early March. The driver was NVIDIA in the US, which has already risen 70% since the beginning of this year. The rise in semiconductors and AI was also noticeable in the Japanese market.
Today, I would like to introduce 5 sectors and notable stocks to focus on in the first half of fiscal 2024.
First, it is related to LLM (Large Scale Language Model), which is the foundation of generative AI. LLM is a language model built using a very large data set and deep learning technology. Large-scale language models are attracting attention around the world because they enable human-like conversations and can perform various processing using natural language with high accuracy.
・ $Fixstars (3687.JP)$has strengths in technology to speed up software, and is a pioneer in the quantum computing field. It is a company that also has strengths in AI image diagnosis, edge AI, AI code review, etc. Flow type earnings are expanding against the backdrop of strong demand for our core technologies such as software acceleration and SDK development, and business performance has also remained steady. The company last year $SAKURA Internet (3778.JP)$A joint research and development agreement was signed with the aim of realizing a world where generative AI can be developed at low cost, with a view to building a highly efficient LLM (large-scale language model) development environment on the GPU cloud. Enterprise use of generative AI and LLM (large-scale language models) is increasing, but there are several hurdles to their spread. Due to soaring hardware prices and excessive demand, it is difficult for companies to secure computational resources on their own, and although operations that continuously improve knowledge and accuracy specific to the needs of each company are necessary, LLM learning requires enormous computational resources and a long time, and that cost increases. Therefore, the company announced that it will provide a computing infrastructure that can realize LLM learning and inference in a short time with high cost performance with a lightweight HW (amount of power) on Sakura Internet's high-end GPU cloud service. Also, it was announced that a high-performance data center with an eye on the AI era will be put into operation in Nagano Prefecture in October this year. As power consumption and heat generation of servers continue to increase along with the development of generative AI, etc. that require huge amounts of computation, “how to cool servers” has become an issue. Therefore, we plan to start commercial operation of container-type and water-cooled systems as soon as possible in Japan.
・ $PKSHA Technology (3993.JP)$It mainly develops algorithm solutions related to natural language processing, image recognition, and machine learning/deep learning technologies. By utilizing the knowledge and data accumulated with “PKSHA Enterprise AI” in “PKSHA Research” and creating a cycle between the two businesses, we aim to further improve research and product quality. In addition to providing AI technical support for various companies by utilizing interactive AI such as chat GPT, we are also expanding sales of our unique service “PKSHA LLMS” for effectively implementing LLM. According to the financial results announced on February 14, earnings increased 20.8% in the same quarter of the previous year due to acquisition of solution projects in the AI Research & Solution business and expansion of sales of projects in the AI SaaS business.
About two and a half months have passed since the Noto Peninsula earthquake on New Year's Day this year. However, water outages in the Noto area of Ishikawa prefecture have not been resolved. Water outages have also occurred in Niigata City, and it looks like aging water pipes have amplified the damage. Large-scale water outages occurred even in the Great East Japan Earthquake 13 years ago. Many water networks were developed during a period of rapid growth, and aging and poor earthquake resistance are viewed as problems. According to the Ministry of Health, Labor, and Welfare, the seismic compatibility rate for major water supply pipelines nationwide was 41.2% in fiscal 2021. This is an 8.6 point improvement from fiscal year 11 after the Great East Japan Earthquake, but it is estimated that it remains at 70% against compliance with 60% or more, which is the country's target for the end of fiscal year 28. Under such circumstances, institutional reform of water administration was carried out for the first time in about 60 years, and maintenance and management of water supply will be transferred from the Ministry of Health, Labor, and Welfare to the Ministry of Land, Infrastructure, Transport and Tourism from April this year. There is an aim to advance infrastructure development and disaster countermeasures by transferring business to the Ministry of Land, Transport, and Tourism, which has regional development bureaus, to municipalities where it is difficult to maintain and manage aging water pipes built during the period of high economic growth.
・ $Kubota (6326.JP)$We provide optimal solutions based on years of experience and the latest technology for renewing aging water pipelines, promoting earthquake resistance, and efficient operation, which are recent issues in social infrastructure. The company has promoted research and development of water treatment technology since the 1950s, contributing to the treatment of public sewage and workplace wastewater. In order to protect lifelines from major earthquakes, the Los Angeles Water and Electricity Authority tested and adopted the company's earthquake-resistant ductile iron pipes in 2012. Earthquake resistant ductile iron pipes, which have a structure unique to Japan where the joints flex and expand greatly and absorb shock, were hardly damaged by earthquakes including the Great Hanshin-Awaji Earthquake and the Great East Japan Earthquake, which shows their high technical strength. Also, in 2023/8, a basic agreement was reached on the establishment of a joint venture manufacturing joint venture between Japan Cast Iron Pipe (5612) and ductile iron pipes that are widely used in Japan as water pipes.
・ $Metawater (9551.JP)$is a leading company in water and sewage treatment equipment construction. We provide optimal “answers” to various issues faced by customers with total solutions that utilize strengths such as mechatronic fusion technology, maintenance and management know-how, and ICT. As for domestic water and environmental infrastructure, there is an urgent need to respond to financial difficulties, lack of human resources, and aging facilities and equipment due to population decline, and the company's technology will be needed in the future. Also, there were reports that in March this year, the company set plans to establish technology that paves the way for longevity and improved output of HRD and LEDs used for sterilization etc. in March this year, and that steps toward practical application are in view. Demand is expected to grow in a wide range of fields, including those for water treatment facilities, medical use, and industrial use.
It seems that attention will be drawn to the US presidential election to be held in November this year. On March 6, former US ambassador to the United Nations Haley announced that he would withdraw from the opposition party and the Republican Party candidate nomination battle for the November presidential election. As a result, former President Trump became the only candidate for the Republican Party. President Biden won the primary election held in southern Georgia etc. on 3/12, and since they secured a majority of delegates from each state in the United States necessary to obtain party nominations, President Biden became a candidate for the ruling party and the Democratic Party. It will be the same battle as 4 years ago. According to a recent New York Times survey, while former President Trump's approval rating is 48%, there are reports that President Biden's approval rating is 43%, and there is a possibility that former President Trump will return to the presidency of the United States again. Therefore, we have extracted notable companies from previous pledges, policies, etc. Speaking of Mr. Trump, his strong America First principle can be cited as a characteristic. There is also an attitude of actively investing in infrastructure, and construction machinery-related stocks are attracting attention.
・ $Yamashin-Filter (6240.JP)$is the world leader in construction machinery filters, and sales by region continued at 55% in Japan, followed by 20% in North America. The company supplies to Caterpillar, a major US construction machinery manufacturer. TBS “N Star” on 2017/1/20 (Friday)
So, there is a track record of the company being introduced as a Japanese company related to the inauguration of the American president, and stock prices skyrocketed at that time. Furthermore, with the financial results announcement on February 5, the current fiscal year's accounts were completely revised upward to a 23% increase in profit.
・ $Takeuchi Mfg (6432.JP)$The sales ratio for the United States has reached 54%, and the share of mini excavators in the same country is 5th. In 2022, the company acquired Kobelco Construction Machinery's plant in South Carolina, USA. We manufacture crawler loaders for active housing construction and infrastructure construction in the United States. The financial results announced in January this year are also doing well. As the number of housing starts in the US continues to adjust, potential demand for housing is strong. Also, non-housing-related construction work, such as living infrastructure construction and construction investment, is booming, and product sales have been strong.
・ $Komatsu (6301.JP)$has the second-highest sales of construction machinery in the world, and is the world's two largest manufacturers along with US Caterpillar, which is number one in the world. Overseas companies account for about 90% of the company's sales, but demand for construction machinery is increasing in North America, etc., and there is also an effect of price increases, and operating profit for the fiscal year ending April to December hit a record high for the same period according to the financial results announcement announced on 1/31. Mr. Trump is speeding up approval of pipelines to “Marcellus Shale,” the largest producer of shale gas, and it seems that there will be benefits for the company entering the construction equipment rental business in North America.
The Tokyo Stock Exchange urged listed companies last year to [respond to realize management that is conscious of capital costs and stock prices]. Furthermore, it was announced that a list of companies disclosing efforts aimed at realizing management that is conscious of capital costs and stock prices will be published from 2024/1/15, and companies that are positive about responding will be made known to investors. As a result, listed companies are making many announcements to the effect that they will review future growth strategies and shareholder returns. In particular, when it comes to dividends, there are companies that increase their payout ratio and companies that implement DOE (Shareholder Equity Dividend Ratio) and progressive dividends. This time, I would like to introduce 2 brands.
・ $Marusan Securities (8613.JP)$In September last year, we resolved on a policy to implement special dividends in addition to regular dividends for the period from the fiscal year ending 2024/3 to the 2028/3 fiscal year. The policy is to pay special dividends per share from the fiscal year ending 2024/3 to the fiscal year ending 2026/3 as an interim dividend, a year-end dividend of 15 yen, and an annual dividend of 30 yen, respectively. In addition, we have clarified the policy for interim dividends for the fiscal year ending 2027/3, year-end dividends of 10 yen, annual dividends of 20 yen, and special dividends for 2028/3 as an intermediate, year-end dividend of 5 yen, and annual dividends of 10 yen, respectively. A regular dividend of 10 yen was also announced in October last year, and the interim dividend for 2024 was decided to be 25 yen. An annual dividend of 60 yen was announced on March 15, along with a year-end dividend of 20 yen and a special dividend of 15 yen. The dividend yield is a high dividend of 6% at the current stock price (1000 yen).
・ $Sojitz (2768.JP)$The medium-term management plan 2026 was announced in November last year. We have established a foundation for the next stage (net profit of 200 billion yen, ROE over 15%). The basic shareholder return policy is a progressive dividend of 4.5% adjusted DOE. Adjusted DOE is expressed as paid dividends ÷ equity capital after adjustments at the end of the previous fiscal year (equity capital excluding transient fluctuating factors such as exchange conversion adjustments, etc.) The dividend yield is 3.5% (as of 3/14).
The sale and reduction of policy holdings is also being actively carried out in response to the upcoming [realization of management that is conscious of capital costs and stock prices]. In February this year, there were reports that the Financial Services Agency asked the four major non-life insurance companies to accelerate the sale of policy holdings. They called for in-depth cuts, assuming that there are cases where relationships with companies through stock ownership lead to hotbeds of misconduct. Each non-life insurance company indicated a policy to sell all policy holdings worth over 6 trillion yen. Last year, US Institutional Shareholder Services (ISS), a US voting advisory company, recommended opposition to the top election with a policy holdings ratio of 20% or more and net assets, and over 30% opposition gathered for the top appointments of Kyocera and Toppan Printing. This year, the asset management company Asset Management One will similarly vote against the top election. There is a growing expectation that corporate growth strategies and shareholder returns will be carried out with funds from the sale of policy holdings.
・ $Kyocera (6971.JP)$In an interview with the Nikkei Shimbun in January this year, President Tanimoto responded that “specific utilization measures will be shown in the fall of 2024” for KDDI (9433) shares that are policy-held. Kyocera holds KDDI shares (as of 3/15) worth approximately 1.5 trillion yen at market value. With a view to some sales, we are reviewing the conventional policy of using bank loans as collateral, and aiming to improve capital efficiency where the return on equity (ROE) remains in the 4% range. The reason is that institutional investors who view policy holdings as an issue at the 2023/6 general shareholders' meeting opposed the bill to elect Director Tanimoto, and the approval ratio dropped 65% from the previous time (21) by about 16 points. The reason why KDDI stock prices are weak also seems to be due to this news.
・ $TBS Holdings (9401.JP)$It holds more than 15 million shares of Tokyo Electric (8035). The market value of the company's stock is approximately 530 billion yen. The total market value of TBS is 668.8 billion yen (as of 3/15). Other than that, TBS also holds shares, land, etc. The company is also an enterprise that received many votes against the top election last year. There is a high possibility that sales etc. of strategic holdings will proceed in the future.
Other than that, attention is being paid to regional banks.
We hold a large amount of shares.
This time, I picked up some related stocks from 5 themes. I would appreciate it if you could use it as a reference.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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