Buy Those Companies That Japan Needs In Its Rebuilding
18 March 2011 - 7:55AM
Dow Jones News
The tragedy in Japan is still unfolding, and the extent of the
devastation is uncertain, but there will come a time when the
country will rebuild.
When that happens, the reconstruction effort will be massive and
lengthy, and will involve both Japanese and international
companies.
With that in mind, Standard & Poor's highlighted some of the
companies and industries that could see greater demand for their
products and services as Japan recovers.
S&P's list of stocks and exchange-traded funds for investors
to consider is a grim reminder of the gargantuan scale of work that
lies ahead, yet underscores the fact that Japan will spend what it
must to speed the recovery of its economy and its society.
Japan's economy is the third largest in the world, but its
growth had been anemic even before the natural disaster struck. As
a result of the quake and its aftermath, Japan's economy will grow
3% in 2012, according to economic forecaster IHS Global
Insight.
The S&P selections aren't so surprising -- concentrated on
building materials, engineering and construction firms that will be
called to repair and rebuild Japan's housing and infrastructure,
and oil refiners that could meet the country's energy needs now
that its nuclear power industry is crippled.
"The major rebuilding effort that will need to take place should
eventually benefit companies that make building materials and
construction equipment," Standard & Poor's Equity Research
Services analyst Michael Jaffe said in the strategy report,
released Thursday.
ETFs with heavy exposure to construction firms, S&P noted,
include First Trust ISE Global Engineering and Construction Index
Fund (FLM) and PowerShares Dynamic Building & Construction
Portfolio (PKB).
Construction giant Caterpillar Inc. (CAT) in particular has a
sizeable presence in Asia, Jaffe pointed out. In trading Thursday,
shares of Caterpillar added 2.7% to close at $103.09.
ETFs with substantial positions in Caterpillar include
Industrial Select Sector SPDR Fund (XLI) , iShares Dow Jones US
Industrial Sector Index Fund (IYJ) PowerShares Dynamic Industrials
Sector Portfolio (PRN) and Vanguard Industrials Index Fund
(VIS).
The S&P report also noted that Japan is the world's
third-biggest user of oil and the second largest importer of
crude.
Energy stocks on S&P's list include Exxon Mobil Corp. (XOM),
Tesoro Corp (TSO), Valero Energy (VLO). Analysts pointed out that
Exxon Mobil is a major refiner in Japan, while Tesoro and Valero
have significant operations on the U.S. west coast and could export
more refined oil to Japan as needed.
-Jonathan Burton; 415-439-6400; AskNewswires@dowjones.com