The Worst Nikkei Stocks of Last Year Become 2021’s Best

(Bloomberg) -- While electric vehicles and cryptocurrencies still grab the headlines, the charge in Japan's Nikkei 225 Stock Average back to its bubble-era highs has been led by old-world technology like watches and copy machines.

The top performer on the blue-chip gauge so far in 2021 has been office-equipment maker Konica Minolta Inc., which is up 46%. Last year the stock was one of the Nikkei's worst, with a 45% drop as the shift toward paperless offices got a lift from the Covid-19 work-from-home trend.

Similar reversals from bottom ten to top ten have been seen in camera maker Nikon Corp. and Citizen Watch Co.

“Japan's ‘most unloved' and the ‘normalization' names are the ones with most momentum right now,” Tim Morse, a director at Asymmetric Advisors Ltd., wrote in a note. Many “old Japan” names had dropped to all-time low book valuations even though they should see profits rebound after the pandemic fades, he said.

The Nikkei Is Back at 30,000, But It's a Whole Different World

Morgan Stanley MUFG upgraded Konica Minolta to equalweight Wednesday after cutting the stock to underweight last May. The broker also lifted its view on Japan's precision instrument sector to “in line” from “cautious,” and raised its price targets for Konica Minolta and peers including Ricoh Co., another company whose stock has seen a big rebound this year.

“Better-than-expected earnings improvements achieved by the companies have heightened our conviction in profit recovery, even if print volumes do not return to pre-Covid levels,” analyst Masahiro Ono wrote in a report.

Along with pre-internet era tech, oil is also back in favor. Energy explorer Inpex Corp. has surged 42% this year, ranking it No. 4 on the Nikkei and paring its 51% plunge in 2020.

Still, despite the global focus on an economic rebound and the cyclical stocks that may benefit, that doesn't mean modern-world names are out of favor. Cryptocurrency hype has driven Monex Group Inc. up more than 150% in 2021, ranking it No. 2 on the broader Topix stock measure. The trend also accounts for the 200%-plus gains in this year's top stocks on the Tokyo Stock Exchange Second Section Index (Remixpoint Inc.) and Jasdaq (Caica Inc.).

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