Financial Experts Highlight High-Performing Small and Mid-Cap Stocks Defying Historic Market Crash
Financial journalist Tomoya Okamura picks up the story! Stocks to Target with NISA "Growth Investment Limit
The market’s breakdown caused investors to become extremely cautious about risk. Typically, you might expect to see investors slowly buying up undervalued stocks with high dividends or defensive stocks whose performance is less influenced by economic conditions during a temporary price dip. However, such behavior was entirely absent.
Instead, what we saw was a short-term movement focused on targeting the rebound strength of stocks that had experienced significant declines (focusing on buybacks). Among the stocks, only Keyence managed to turn positive from the beginning of August. Although there has been some recovery from the overselling, the wounds are far from fully healed.
Furthermore, as a result of the sharp decline, many investors are now holding stocks with unrealized losses. This has created a significant amount of “sell” pressure at the levels where prices have rebounded, making it reasonable to assume that any further upside from here will be difficult.
Stocks That Have Surged Over 10% in August After Updating Year-to-Date Lows
Stocks that have only managed to rebound to the extent of their previous declines are still unable to show a net gain for August, similar to the Nikkei 225, which has not turned positive for the month.
Are there any stocks that, despite falling initially, have experienced remarkable rises and are up significantly in August? We investigated this, including small and mid-cap stocks.
Among Prime-listed stocks that faced the misfortune of updating their year-to-date lows in August but then made a strong recovery, several have seen increases of over 10% from the beginning of the month.
Focusing on stocks with a market capitalization of over 50 billion yen, we find companies like Hokko Chemical Industry and Irex among a total of 11 stocks【Table 3】. However, it is not necessarily the case that undervalued stocks, as measured by metrics such as PER, PBR, and dividend yield, are being prioritized for buying.
Common among the stocks that have risen significantly is that many, despite plunging to year-to-date lows in August due to a deteriorating market environment, showed extraordinary positive reactions to the positive earnings reports released during that period.
Ideally, growth stocks with positive earnings prospects should not have updated their year-to-date lows at this time. It is clear that money has flowed into these stocks. The saying “cheap is bad” might apply here. Instead of just high dividend yields (due to low stock prices), the “quality” seen in earnings is likely to be the key factor.
■ In the paid version of “Friday’s subscription”, Tomoya Okamura highlights three noteworthy stocks among the 11 small and mid-cap stocks that have shown remarkable performance after overcoming the August crash.
Interview and text： Kenji Matsuoka
