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 "Japanese small caps have been clobbered in 2006 -- down about 50% year-to-date," says global expert John Christy. And it is from this sector, that the editor of The Forbes International Investment Report goes for a top speculative play for the coming year. Here, he looks at Internet Initiative Japan Inc. (IIJI).
"Japanese small caps got hammered by the Livedoor scandal earlier in the year and never got back on their feet. And with blue chips such as Canon and Toyota delivering double-digit gains, there wasn't much need to bother with smaller companies anyhow. "This should change in the year ahead. International markets have done extremely well across the board and investors are looking for pockets of opportunity. "In particular, hedge funds have been sifting through the rubble in Japanese small caps. These companies tend to be more profitable, more entrepreneurial -- and much cheaper -- than their large-cap peers. "Internet Initiative Japan Inc. (IIJI NASDAQ) has seen its net income double in its most recent quarter on strong demand for its IT outsourcing services. As Japan Inc. continues to restructure, IIJI's expertise will continue to be in demand. At a recent $9, IIJI sells for less than 20 times earnings. "The company recently moved to the First Section of the Tokyo Stock Exchange, which will boost its visibility with investors. There's still a lot of risk -- IJII has been an extremely volatile stock. But as long as IIJI continues to deliver strong profit growth, there will be plenty of upside." |
