Itochu Corporation (8001) hits a fresh year-to-date high! A method to become rich slowly and steadily by leveraging the characteristics of large, undervalued stocks
The U.S. Federal Reserve Board (FRB) has, as most expected, cut interest rates by 0.25%, and stock prices continue to rise. The Nikkei Stock Average is approaching the high for this year set in May.
What is driving the rise isthe rally in large undervalued stocks. For example, Itochu Corporation (8001) has recorded a year-to-date high.
The Turn in Large Undervalued Stocks Has Arrived!
The reason becomes clear when looking at recent money flows.
The Fed shifted from a tightening cycle to a cutting cycle in July. Then,money first flowed into growth stocks with unquestionable growth prospects. Examples include Oriental Land Co., Ltd. (4661).
However,these stocks had prohibitively high PEs. Oriental Land Co., Ltd. trades at around 80 times earnings. With such high levels, the rally ran out of steam.
So the market turned its attention to large undervalued stocks.The economy may recession, but these stocks are already cheaply valued and well-known, so it should be safe to expect a rise. The PE of Itochu Corporation remains around 7 times earnings even now.
The merits of large undervalued stocks lie in places like these. In other words,since they are already cheap, they are unlikely to fall sharply, and when a favorable market flow comes, they will rise steadily. And if dividends are added, they become ideal for slow, long-term investing.
To Grow Your Assets Steadily and Slowly...
So, will the rise in large undervalued stocks (trading houses, banks, leasing companies, etc.) continue as it has? I think not for long.
These stocks have ultimately entrenched the view that they are "undervalued". Therefore, unless there is a major change in the company or society, it is difficult to overturn that valuation.
In that sense, I believe the returns you can get by buying now are limited.
That said, it does not mean investing in these stocks is bad.What matters is how you think and how you act.
What undervalued stocks need is stability. Because they are seen as undervalued, they are less likely to fall, and they may rise with market trends. In other words,the price movement is likely to stay in a boxed range.
With such stocks, aiming for a swift, large return tends to result in buying at high prices without significant changes, which you can understand.
In other words, now is not the time to buy.Those who steadily accumulate during periods when few are paying attention can reap the rewards. By applying dollar-cost averaging and buying only when prices are low, it is important to lower the average purchase price even a little.
On the other hand, there is no guarantee that one can reliably time buy-sell by waiting for a clean box pattern. Stock price movements are ultimately random.
In such a situation, a more reliable method isto buy only when prices are cheap and hold on to them. If the market turns higher, you will benefit, and by buying steadily into growing stocks, you can expect long-term price increases and increased dividends.
More importantly,there is a significant benefit to being able to hold stocks that have a small risk of large declines, both for asset management and psychologically. For those who believe in gradual growth, nothing beats this. It is worth remembering.
Below, I will provide reference articles.
